The crypto markets remain volatile as ever. Since we last spoke, Bitcoin (BTC, Tech/Adoption Grade “A-”) plunged 20% yesterday to $40,000, a level we haven’t seen since early August.
Today, the King of Crypto is working its way back up to the $45,000 area.
And a key investor sentiment indicator is telling us that the next move — not just for Bitcoin, but for larger-cap cryptos in general — should be even higher.
The Crypto Fear & Greed Index shows that there is a lot of fear in the markets right now.
Why is that a positive sign?
Because fear is often a contrarian indicator. In other words, it signals that, once short-term fears subside, upward price action lies dead-ahead:
The crypto markets — along with just about every other asset market in the world — got spooked this week thanks to the Evergrande crisis.
Evergrande is one of China’s largest real estate developers. And recently, it became one of the most indebted ones, accumulating over $300 billion of debt.
Things have escalated to the point where the company warned investors it could be facing default due to its inability to raise money quickly enough.
The problem is that Evergrande is deeply embedded in China’s financial system and economy. Its failure could trigger a chain of defaults across the country.
This sent ripples of fear across the global market on Monday, triggering a sharp drop across the U.S. stock indexes.
As BTC has recently been highly correlated to S&P 500, it too was affected by the volatility.
But don’t look for the Crypto Fear & Greed Index to recover just yet.
That’s because here is one more indirect way Evergrande crisis has affected crypto markets, as we explain in this thread. (To read the full thread, please click the image below.)
As you can expect, this rollercoaster of prices didn’t only affect BTC. It also took altcoins — that is, cryptos that are not Bitcoin — for a ride.
This contrast of sentiment and price action can best be seen by comparing two set of tweets.
In the first one, we’re praising AVAX for making its new all-time-high ...
In the second set, you’ll see a poll a from a few days later, where we ask you to assess the price of Ethereum (ETH, Tech/Adoption Grade “A-”). Notice the lower price points, as well as results of the vote.
Murky waters indeed.
It’s important that we note these headline-driven events correspond with the downside of the current 80-day cycle. Meaning, some correction would have been likely at this time even without Evergrande’s assistance.
Even though the last week was quite turbulent, things could soon take turn for the better. The S&P 500 seems to have bottomed out recently.
If this correlation with the crypto market sticks, it could lead to price recovery.
Better yet, our long-term outlook is still bullish as we get into the final months of 2021.
One coin going up with the tide could be Solana (SOL), a crypto which went on a rollercoaster ride of its own — it surged several times, only to erase most of those gains in an aftermath of an outage caused by the transaction overload several days ago.
Juan Villaverde’s Weiss Crypto Portfolio subscribers were sitting on a big Solana profit on Monday. Those who acted on his signal to cash out had the opportunity to do so with up to a 122% gain.
To make sure you’re on the list to receive Juan’s next round of recommendations, click here.
That move was made to preserve a nice, short-term gain. And there may be more upside for Solana in the future. But for now, we see one big problem for this cryptocurrency:
In the meantime, we’ll be watching for fear to give way to greed in the crypto sphere. Volatility will eventually shake out, and opportunities will continue to abound.
Be among the first to know about them — and what your fellow traders are saying about them — when you follow us on Twitter at https://twitter.com/weisscrypto.
Until then, stay safe and trade well.
Jurica Dujmović
