and other cryptocurrencies have held up better than stocks amid recent market pressures, a bullish signal that belies the fact that digital assets look to be losing momentum and could take a sharp leg lower soon.
The price of Bitcoin rose 1% to above $21,300 on Tuesday, inching higher after a selloff on Friday plunged the largest crypto from above $23,000 to below $21,000. Weakness at the end of last week came in tandem with a rout in the stock market, which was repeated on Monday when the
tumbled 2.1% in its worst day since June 16.
“Bitcoin weakness however is not matching the selling pressure hitting stocks, so that could be a sign that investors are not ready to see prices retest the June lows,” said Edward Moya, an analyst at broker Oanda. “Normally on a day like [Monday], Bitcoin’s percentage loss would easily exceed the weakness hitting the S&P 500 index.”
While cryptos should, in theory, be uncorrelated assets, they have proved to be largely linked to other risk-sensitive bets, like stocks and especially tech stocks in the
index. Recent declines across both tokens and stocks have been linked to investor fears around inflation and central bank policy, especially whether the Federal Reserve will continue on its path of aggressively hiking interest rates to tame high inflation.
Fed Chairman Jerome Powell’s speech Friday at the Jackson Hole economic conference could provide some much-desired clarity to the market on the central bank’s pathway. It’s likely to be the most important catalyst for the week for equities and cryptos alike.
As Powell’s speech draws nearer, investors in digital assets may be keen to view the relative strength of Bitcoin and its peers over the past day as a bullish signal. But it may be premature to ignore the recent loss of momentum that has seen Bitcoin prices cascade down from last week’s peak above $24,000—the highest consistent levels since a mid-June selloff pushed Bitcoin off the $30,000 cliff.
“Bitcoin is now below its 50-day moving average after a sharp decline late last week. The selloff is associated with a loss of short-term momentum, increasing risk within the long-term downtrend,” said Katie Stockton, managing partner at technical research firm Fairlead Strategies.
This loss of momentum puts the largest digital asset in a vulnerable position that could see it drop below $20,000, according to the analyst.
“Short-term oversold levels should produce a few days of stabilization, after which we expect a retest of and potential breakdown below long-term support in the $18,300 to $19,500 range,” Stockton added. “Downside momentum is growing stronger from a long-term perspective, supporting a long-term bearish bias.”
the second-largest crypto, gained 2% to $1,600. Smaller tokens or altcoins
both rose almost 3%. Memecoins—which were blockchain projects initially based on internet jokes—also moved higher, with
3% in the green and
ticking up 1%.
Write to Jack Denton at firstname.lastname@example.org