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(Kitco News) - Prices trended higher across the cryptocurrency market on Tuesday as renewed concerns about the health of the banking system motivated some investors to put their wealth in crypto rather than bank deposits.
Stocks fell under pressure at the market open in response to the concerns, and spent the remainder of the trading day trying to regain lost ground, but failed to get out of the red as investors remain focused on Thursday’s Consumer Price Index (CPI) report.
“The US stock market was led lower today by a downgrade on small and regional banks from Moody’s,” said Greg Magadini, Head of Derivatives at Amberdata. “Higher funding costs (rates), potential regulatory capital weaknesses, and rising risks tied to commercial real estate loans were the factors that prompted Moody's to lower credit ratings.”
“Should banks need to raise capital to strengthen their balance sheet, we could see large issuances of common stock, causing downward pressure on the market,” Magadini warned.
At the closing bell, the S&P, Dow, and Nasdaq finished lower, down 0.42%, 0.45%, and 0.79%, respectively.
Data provided by TradingView shows that after trading sideways near $29,200 in the early hours on Tuesday, Bitcoin (BTC) bulls rallied the troops and pushed the price to a daily high of $30,020 in the late afternoon, and now look to extend the price rally.
BTC/USD Chart by TradingView
“The correlation between the stock market and BTC is decoupling as BTC has proven to be a beneficiary of banking turmoil,” Magadini said. “In mid-March of this year (2023) we saw BTC outperform ETH in response to the SVB bankruptcy. Today’s news echos those sentiments and BTC is holding firm.”
September Bitcoin futures prices also traded higher on Tuesday, according to Kitco senior technical analyst Jim Wyckoff, who noted that “Prices continue in a sideways and choppy grind.”
Bitcoin futures 1-day chart. Source: Kitco
“Bulls and bears are on a level overall near-term technical playing field at present,” Wyckoff said. Based on the support and resistance lines identified on the chart above, “The direction in which prices break out above the resistance line or below the support line is likely to be the direction of the next trending price move in the market.”
Further insight into Tuesday’s price action was provided by market analyst Rekt Capital, who posted the following chart, noting Bitcoin’s surge above $30,000 is similar to moves seen last week and in late April when “BTC was able to do the same but ended as an upside wick.”
BTC/USD 1-week chart. Source: Twitter
“[This] is why a weekly close above ~$29,250 is so important to show that seller pressure in this ~$29,900-$30,100 is getting weaker,” Rekt Capital said. “As long as BTC holds ~$29,250 as support this August, it will be positioned for uptrend continuation. But until the August monthly close is in, it's possible BTC could dip below [that level] again. For bull bias, [the] most important thing is a 1 [month] close above $29,250.”
And the macro view for Bitcoin moving forward was provided by stock-to-flow model creator Plan B, who noted that Bitcoin’s “5-month realized price (aka Short Term Holder price, light blue) is now above 2-year realized price (dark blue).”
Bitcoin realized price. Source: Twitter
“If history is any guide (red circles) it will stay above for the next 2+ years,” Plan B said. “Interesting times ahead.”
Altcoins climb higher
It was a green day for the altcoin market as 90% of the tokens in the top 200 recorded gains while several recent top performers took a hit as traders realized profits.
Daily cryptocurrency market performance. Source: Coin360
Golem led the field with a gain of 46.4% to trade at $0.291, followed by an 18.51% gain for UniBot (UNIBOT) and a 10.9% increase for Pepe (PEPE). Livepeer (LPT) led the losers with a decline of 13.9%, while Tomochain (TOMO) fell 9.44% and XDC Network (XDC) lost 6.37%.
The overall cryptocurrency market cap now stands at $1.19 trillion, and Bitcoin’s dominance rate is 49%.
