Plunging Stock, Crypto Markets Leave Investors Searching for Answers




The Monday Massacre reverberated throughout equities markets today, leaving its mark not only on the bitcoin price — which dropped below $5,000 for the first time this year — but on tech stocks as well.

Recent Bitcoin Price Drop Attracts Bearish Analysis

To make matters worse, the bitcoin price has not yet bottomed out, according to technical analysts at Bloomberg Intelligence.

The global financial media portal eyes a further 70 percent drop in the digital currency that could lead its price as low as $1,500. For reference, bitcoin this year has already lost more than 60 percent of its value. Last Wednesday’s sell-off has sparked a new wave of bearish targets for the cryptocurrency after it broke through well-publicized support near $6,000. Analysts are calling $4,500 and $3,500 the next potential support levels.

bitcoin price chart
BITCOIN/USD CHART | SOURCE: TRADINGVIEW.COM, COINBASE

Travis Kling, the founder of crypto hedge fund Ikigai, is among the ones that fear an extended downward action in bitcoin markets. The former Point72 investment manager stressed that the latest Bitcoin Cash blockchain split could damage the overall crypto market in the long-term.

“There’s a small chance that something really bad could happen related to Bitcoin Cash that could then impact the entire crypto market,” he said.

An ongoing dispute between prominent crypto figures such as Roger Ver and Craig Wright over whose project would be activated in the most recent hard fork has sucked billions of dollars out of the crypto market. One of the supporters of Ver-allied Bitcoin ABC is Bitmain, the world’s leading crypto mining company. They had reportedly pledged to deviate hash power from Bitcoin to Bitcoin Cash to ensure that Bitcoin ABC’s BCH implementation won out, reducing investor and mining confidence in the short-term stability of the original Bitcoin.

Bloomberg analyst Mike McGlone supports the sentiment surrounding the BCH fork as a catalyst for the crypto market’s decline, but his firm’s analysis believes the slide could turn more serious.

“The pump sparked the drop for the Bitcoin Cash hard fork,” he wrote. “That pump that began a few weeks ago got the market a bit too offsides with speculative longs playing for the good old days. But this is an enduring bear market.”

Chipmakers, FAANG Stocks Suffer Major Losses

nvidia
Source: Shutterstock

The impact of a plunging crypto market throughout the year also reflected on the performance of two mainstream chipmakers, AMD and Nvidia. The US companies, which drew out from manufacturing crypto mining equipment citing poor returns, recently posted lackluster sales forecasts for the current period, sending their respective share value to double-digit percentage losses. While AMD stock plunged as much as 11 percent this Monday, Nvidia shares also recorded a 17 percent depreciation in value.

The US stock market, in general, went through a bloody Monday trading session. The major tech giants that were bullish most of the year also deformed under their poor sales forecasts and slow global growth. The stocks of FAANG companies, an acronym for Facebook, Apple, Amazon, Netflix, and Google, are already down circa 20 percent since their all-time high.

apple stock
BATS: AAPL 1D CHART | SOURCE: TRADINGVIEW.COM

The jittery performance came in light of the poor business relationships between the US and China. The trade war intensified when two countries clashed over the weekend at a Pacific Rim Summit. For the first time in three decades, two of the world’s leading economies could not find common ground on their global trading strategies. The negative outcome sent a panic across the market, leading the Nasdaq to post a 2.7 percent loss in a day. The S&P 500 index, at the same time, fell 1.6 percent.

The presidents of both the US and China are scheduled to meet later this month at the G20 summit. The meeting will be watched closely by every professional investor, and stocks could even start correcting to the upside ahead of the summit.

The US-China trade war, coupled with factors from the BCH hash war, has certainly spurred investors to take out their money off the market — whether their market of choice is traditional equities or cryptoassets — for the time being. Meanwhile, the US dollar is also reversing from its bull trend. The greenback fell to its two-week low on Monday and is looking to fall further on slow global growth.

Crypto Markets: Technical Outlook

bitcoin price
BITCOIN 1W CHART | SOURCE: TRADINGVIEW.COM, COINBASE

The bitcoin market has been fluctuating inside a falling wedge formation since the beginning of this year. A falling wedge generally points to stronger breakout actions towards the north. So, just from an indicator’s point of view, there is a likelihood of bitcoin testing $3,500-3628 as its next bottom range and attempting a sharp pullback towards the upper trendline of the falling wedge formation. In the event of a breakout, the price could jump as high as 7,435-fiat.

We have placed the bitcoin bottoms predicted by other analysts to highlight potential downside actions. $3,500 without a doubt is an achievable bear target. A breakdown action below that level could put pullback pressure on circa $3,000-level, a strong support from September 2017. Any extended downside action from this level points to a free fall towards $1,500 — as predicted by Bloomberg — with a potential pullback level at $1,788. There is indeed no concrete support available below $1,788, according to the Coinbase chart above.

Nevertheless, if stability returns to the BCH market, it should reinject confidence in the bitcoin market as well. Therefore, the BTC/USD index staying above $3,500 would remain a bullish sign ahead of a potential bitcoin ETF approval within the next year and the launch of Bakkt next month.

Featured Image from Shutterstock. Charts from TradingView.

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Author: Yashu Gola

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