(Kitco News) – Cryptocurrency traders found themselves scrambling for cover to start the week as Bitcoin’s (BTC) price took the elevator down from support at $60,000 near midday on Sunday to hit a low of $49,053 in the early hours on Monday, a 19.5% decline in less than 24 hours.
BTC/USD Chart by TradingView
“The cryptocurrency market was hit by a sell-off over the weekend, the likes of which haven't been seen in a long time,” said Alex Kuptsikevich, senior market analyst at FxPro. “We would not have been surprised to see such a sell-off before the halving due to the last takeout of buyers before the start of active growth. There is nothing unusual about such a downward amplitude in a bear market either, but not now, when the 4-year cyclical pattern should work on the bulls' side.”
“Our pessimistic scenario of a 20% decline in capitalization to the $1.79 trillion area has worked out, having made a very fast drop to the lower boundary of the corridor since March,” he added. “Bitcoin is down 13.5% from its peak at last week's close and has lost another 15% since the start of the day on Monday, falling below $49K at one point. Active pressure on the first cryptocurrency started after a failed attempt to go above $70K and overcome the resistance of the descending channel seven days ago.”
“At the same time, its lower boundary turned out to be not so strong, and the price flew through it with an acceleration, finding itself also under the 50- and 200-day moving averages,” Kuptsikevich said. “Worse, at its lowest point, Bitcoin dipped below its 50-week average.”
“Without strong buyer support right now, it goes even lower, and it would trigger an even more active sell-off as it did in late 2021 and early 2022,” he warned. “If it doesn't hold either, it's worth preparing for a failure towards $42K.”
According to data provided by Coinglass, over the past 24 hours, 320,007 traders were liquidated for a total of $1.21 billion.
“In the past 24 hours, major mainstream crypto assets have fallen sharply, with Ethereum (ETH) down by over 20% and Bitcoin by 11%,” noted Gracy Chen, CEO of Bitget. “The derivatives market has seen a liquidation of [$1.21B] including long orders of nearly [$1.01B]. According to Alernative.me data, the current market panic index has fallen to 26, and the market is in a ‘panic’ mode. There are multiple reasons for the flash crash and bearish behavior in the market.”
Chen noted that it’s not just crypto prices that are struggling as stocks and precious metals also opened sharply lower on Monday.
“The global economy is alerted with geopolitical tensions and the U.S. economy is facing recession pressure,” she said. “The U.S. stock market has fallen for three consecutive trading days, while the Japanese stock market has been in a circuit-breaker for two consecutive trading days. The panic index VXX soared 27% in a single day indicating the macro-financial market is under great pressure for correction, causing wider market selling.”
“The emotional impact of large institutions’ market actions also play a role, with Berkshire Hathaway cash pile surging after selling Apple and Bank of America stocks in the past 12 trading days,” Chen said. “Warren Buffett sold stocks and now holds cash in large quantities, affecting the overall sentiment of the market.”
“On the crypto front, Jump Crypto, a leading market maker in the crypto market, sold ETH, causing the price to fall sharply after analysts bet downfall post ETF approvals,” she added.
“Judging from historical trends in the crypto market, before the market forms a true bullish drive, it needs to experience a sharp decline to reduce the long positions of the contract in order to reduce the selling pressure for future rises,” Chen said. “This is a key factor in the rapid rise of the market, observers can continue to pay attention to changes in the macro market including the panic index indicators.”
“At present, the core key to affecting the market trend is the sentiment index,” she concluded. “If VXX starts to fall, it means that the panic sentiment has eased.”
David Morrison, Senior Market Analyst at Trade Nation, said the biggest beneficiary of the market turmoil has been the bond market.
“This morning both the NASDAQ 100 and Russell 2000 had lost around 4% in early trade, with the Dow and S&P 500 following closely behind,” Morrison said. “This is clearly a ‘risk-off’ move across equities. But investors are also cutting their exposure to such ‘safe havens’ as precious metals, as gold and silver are down sharply, as is oil.”
“The main beneficiary in all this is the bond market,” he said. “Yields have slumped over the last few trading sessions as investors price in the prospect of sharply lower interest rates, as recent data weakness has boosted recession fears. There’s also the ‘flight-to-quality’ aspect, where funds coming out of equities are parked in bills, notes and bonds until investors get some clarity over how much more stock market downside there may be. The yield on the key 10-year Treasury Note has dropped to 3.75% this morning, its lowest level since July last year.”
“There have been a combination of factors triggering the moves,” Morrison said. “There have been some disappointing Q2 earnings reports, particularly from amongst the ‘Magnificent Seven’, while recent economic data releases suggest an economy that is slowing rapidly. Despite a strong Q2 GDP report, which is backward-looking anyway, last week brought poor manufacturing, labour and construction numbers, topped by Friday’s weaker than expected payroll update. This big ‘derisking’ also coincides with the move into peak summer.”
“At some stage, buyers will come back in to take advantage of ‘knock-down’ prices,” he suggested. “But there’s no sign that the major indices have stabilised yet. The bigger question is whether this bloodletting will prove sufficient to provide a basis for a resumption of the stock market rally, and ultimately fresh record highs. The alternative is that the top is in, and investors will have to adapt their outlook, and strategies, accordingly.”
“Bitcoin was down around 13%, and briefly broke below $50,000,” Morrison added. “There’s some mild support around here. But if that fails to hold, the path towards $40,000 is fairly uncluttered. Ether was down around 17%, not that far above $2,000, and close to its lowest level this year.”
At the time of writing, Bitcoin trades at $53,694, a decrease of 11.73% on the 24-hour chart.
