(Kitco News) – Cryptocurrency prices traded deep in the red on Wednesday morning after Bitcoin (BTC) bears malled their way through support level after support level in a late Tuesday sell-off that saw King Crypto fall to a low of $58,040 on Coinbase before bulls could halt the onslaught.
BTC/USD Chart by TradingView
“The cryptocurrency market has plunged 6% to a capitalization of $2.08 trillion, its lowest level in nine days,” noted Alex Kuptsikevich, senior market analyst at FxPro. “Bitcoin is falling in line with the broader trend, while Ethereum and Solana are down 8.4% and 7.3%, respectively. Gold has also experienced an almost synchronized sell-off, losing around 1%, but equity markets remain generally positive and hopeful.”
“Bitcoin fell below $58K in thinly liquid trading early Wednesday but later recovered to $59K by the start of active trading in Europe,” he added. “The sell-off intensified after a failed attempt to break above $65K early Monday afternoon, taking the price back below its 200- and 50-day moving averages.”
“The first cryptocurrency may be heading towards the lower end of the trading range as it heads towards $54K,” Kuptsikevich warned. “The market appears to be largely dragged down by automatic stop orders during light trading hours. Such sell-offs often take leveraged traders out of the market but also attract long-term buyers on dips.”
Data provided by Coinglass shows that a total of $308.87 million in derivative positions were liquidated over the past 24 hours, with longs accounting for $243.76 million of those losses.
“Ethereum (ETH) briefly dipped below $2400, its lowest level since 8 August,” Kuptsikevich said. “There is a risk that this week's sell-off is a second leg lower, following the collapse and subsequent consolidation of previous weeks. A drop below $2100 could confirm this hypothesis.”
According to Mike McGlone, Senior Commodity Strategist at Bloomberg Intelligence, the risk-asset race “may be over” as Bitcoin suffers from a “hangover.”
“Is the fastest horse signaling the race is over?” McGlone questioned. “At about 11x now, the #Bitcoin/S&P 500 peak was 15x in 1Q20, and this year's lower high was 14x.”
“The biggest money pump in history and US ETF launches in past tense may suggest a hangover, pendulum swing back toward 7x Bitcoin/SPX,” he warned.
While the S&P experienced a 10% pullback as the Japanese yen carry trade unwound on August 5, it has since bounced back and now trades near record highs after gaining nearly 20% since January 5. Bitcoin, on the other hand, has seen its rally stall since the middle of March and currently trades nearly 20% off its all-time high after briefly falling below $50,000 amid the yen carry trade unwind.
McGlone warned that the weakness might continue, saying that Bitcoin continues to “rollover. ” When asked why Bitcoin price "continues to languish" despite good news and increased adoption by institutions, McGlone reiterated that “The fastest horse in the race may be signaling the race is over."
Offering a more positive take on the dip back below $60,000 was Crypto Chase, who posted the following chart showing that Bitcoin continues to trade in the range that it has been stuck in since the middle of March.
“Still no break in the trend,” he said. “The bright side of all this consolidation is that a trend break should be a clear signal to all-time highs. The not-so-bright side is that a lower low could be next (although I'd see that as a buying opportunity / should be bottom before ATH's).”
At the time of writing, Bitcoin trades at $58,730, a decrease of 4.70% on the 24-hour chart.
All eyes on Nvidia
Stocks also showed weakness in early trading on Tuesday as investors await Nvidia’s quarterly report, which will be released after the market closes on Wednesday.
“The whole financial world, including the media, is waiting for Nvidia's quarterly report,” said Kuptsikevich. “The company, which has a market capitalization of almost $3 trillion, is expected to double its sales compared with last year. It is difficult to beat such expectations, but giving an optimistic revenue forecast for future quarters and years without disappointing investors is even harder.”
“The size of the company and, more importantly, its impact on a host of other stocks, makes the report, which will be released on Wednesday after the close of the main US session, a hotly anticipated event,” he noted. “Nvidia has managed to please and surprise investors in the past, but it may still need to do so.”
Kuptsikevich highlighted that options market data shows an expectation that NVDA price could change 10% following the release, “which is in line with the upside amplitude of the previous two reports in May and February, as well as last August.”
“At current prices, this would take the share price to new all-time highs above $141 and the market capitalization to almost $3.5 trillion, confirming the battle with Apple for the number one spot,” he said.
“On positive news, the major US equity indices have a good chance of approaching or reaching all-time highs again, shaking off the effects of the carry trade unwinding in late July and early August,” Kuptsikevich predicted. “Disappointment with the report could trigger a wave of selloffs in AI-related stocks, which have rallied strongly over the past 20 months. This is likely to spark fresh fears of a repeat of the dot-com crisis of 2000.”
Kuptsikevich warned that “A sharp decline could trigger a deeper correction by confirming the divergence between price and RSI on daily timeframes, where a higher price peak corresponds to a lower Relative Strength Index peak. The downside potential in this case will be the $90 area, which would take the price back to this month's lows and closer to the 200-day moving average.”
“However, the stock's exit from its historical highs may not be the end of the move,” he concluded. “In this case, a failure in early August would be a typical 61.8% Fibonacci retracement of the global rally from early 2023 to the 20 June high. A break above this would initiate an 'extension' with an upside potential of $220.”
NVDA Chart by TradingView
