More Negativity Out of China Continues Correction … For Now

•  Bitcoin (BTC, Tech/Adoption Grade “A-”) is down 5% today and is trading at about $42,500.

•  Ethereum (ETH, Tech/Adoption Grade “A-”) is about 8% lower, falling below the $3,000 benchmark to around $2,900.

•  Bitcoin’s crypto market dominance remained completely unchanged at 41.7%.

Bitcoin and the broader crypto market are trading lower so far today after a brief relief bounce. Much of the pullback can be blamed on negative news from China.

First came the Evergrande Group fears. With Bitcoin’s correlation to the S&P 500 so high, the broad market began shaking.

Now, a post on the People’s Bank of China’s (PBOC) website says, “services offering trading, order matching, token issuance and derivatives for virtual currencies are strictly prohibited.”

In the face of an ongoing correction, traders began letting these headlines fuel their fear, uncertainty and doubt (FUD) ... and control their trading.

This is not the first PBOC attack on crypto. China’s stance against crypto isn’t new, and the country has consistently repeated that it’s fully against future implementation. The crypto market has seen these China-driven pullbacks before, and they have largely failed to stifle prices over prolonged periods in the past.

Our opinion: This price action is not immediately concerning unless it forms a pattern of consistent lower highs and lower lows. Long-term fundamentals are still holding up, so we’re expecting this to be a short-lived correction.

The King of Crypto is holding its value better than most altcoins, as is expected given its status as the most established cryptocurrency and relative safe haven. Despite the negative move today, it is positive to see an immediate relief bounce from $40,700 back to $42,500.

Still, Bitcoin fell significantly below its 21-day moving average. It’ll need to recover past it to regain bullish momentum.

Here’s Bitcoin’s price in U.S. dollars via Coinbase Global Inc. (Nasdaq: COIN):

Ethereum is faring worse than Bitcoin in this pullback, but so is most of the crypto market. Like Bitcoin, it fell decisively below its 21-day moving average and failed to find support. It even dipped below the psychologically significant $3,000 level.

But Ethereum should see positive pricing pressure as more supply is burned. Since the EIP-1559 upgrade in early August, nearly 360,000 ETH have been burned. Its much-anticipated ETH 2.0 upgrade is predicted to roll out in 2022, and over 7 million ETH are currently staked on the platform.

Here’s Ethereum’s price in U.S. dollars via Coinbase:

Index Roundup

It was a tough week for the entire crypto market, as few cryptos were spared from the sizeable pullback. Trading was relatively muted to begin the week, but the market saw a mid-week sell-off that it hasn’t yet bounced back from.

The Weiss 50 Crypto Index (W50) fell 18.36% as the broad market gave back recent gains.

The Weiss 50 Crypto Ex-BTC Index (W50X) dropped 20.25%, showing that Bitcoin’s performance was slightly better than the rest of the crypto market.

Breaking down performance this week by market capitalization, we see that there were no winners.

The large-caps struggled, as the Weiss Large-Cap Crypto Index (WLC) lost 17.62%.

Mid-cap cryptocurrencies suffered the worst of it, with the Weiss Mid-Cap Crypto Index (WMC) declining 23.37%.

The small-caps were able to limit losses better than the rest of the market due to a sharp rebound after the initial drop. The Weiss Small-Cap Crypto Index (WSC) fell by 13.96% after the dust settled.

The small-caps outperformed again because they saw some relief after the mid-week sell-off. But this extended period of outperformance for small-caps won’t last unless Bitcoin and the large caps can regain traction and lift the broad market with them.

Notable News, Notes and Tweets

• Pomp criticizes a Bloomberg article the claims China outlawed all crypto transactions.

• Michael Saylor highlights how Twitter (NYSE: TWTR) users can now be paid in Bitcoin.

• Tyler Winklevoss dismisses recent headlines as fear, uncertainty and doubt (FUD) while talking about buying the dip.

What’s Next

Much of the news dominating today’s headlines addresses China’s resistance against cryptocurrency adoption. While the market has pulled back, the reaction is likely overstated. China is simply reaffirming its stance from 2017 outlawing business dealings.

Bitcoin’s correlation with the S&P 500 has been higher than usual lately, but that is likely driven by macroeconomic uncertainty. However, its correlation fluctuates over time, and it remains a hedge against an uncertain future caused by reckless fiscal and monetary policies along with other macroeconomic risks.

Meanwhile, crypto adoption is expanding without China, and Twitter’s crypto feature rollout is an important step for the industry.

Twitter has over 300 million active users, and these functionalities will certainly stimulate greater interest. More companies will likely follow Twitter’s lead, which will drive more transactions and even greater community involvement. That should help prices moving forward.

Best,

Sam Blumenfeld

• Bitcoin (BTC, Tech/Adoption Grade “A-”) is down 5% today and is trading at about $42,500.

• Ethereum (ETH, Tech/Adoption Grade “A-”) is about 8% lower, falling below the $3,000 benchmark to around $2,900.

• Bitcoin’s crypto market dominance remained completely unchanged at 41.7%.

Bitcoin and the broader crypto market are trading lower so far today after a brief relief bounce. Much of the pullback can be blamed on negative news from China.

First came the Evergrande Group fears. With Bitcoin’s correlation to the S&P 500 so high, the broad market began shaking.

Now, a post on the People’s Bank of China’s (PBOC) website says, “services offering trading, order matching, token issuance and derivatives for virtual currencies are strictly prohibited.”

In the face of an ongoing correction, traders began letting these headlines fuel their fear, uncertainty and doubt (FUD) ... and control their trading.

This is not the first PBOC attack on crypto. China’s stance against crypto isn’t new, and the country has consistently repeated that it’s fully against future implementation. The crypto market has seen these China-driven pullbacks before, and they have largely failed to stifle prices over prolonged periods in the past.

Our opinion: This price action is not immediately concerning unless it forms a pattern of consistent lower highs and lower lows. Long-term fundamentals are still holding up, so we’re expecting this to be a short-lived correction.

The King of Crypto is holding its value better than most altcoins, as is expected given its status as the most established cryptocurrency and relative safe haven. Despite the negative move today, it is positive to see an immediate relief bounce from $40,700 back to $42,500.

Still, Bitcoin fell significantly below its 21-day moving average. It’ll need to recover past it to regain bullish momentum.

Here’s Bitcoin’s price in U.S. dollars via Coinbase Global Inc. (Nasdaq: COIN):

Ethereum is faring worse than Bitcoin in this pullback, but so is most of the crypto market. Like Bitcoin, it fell decisively below its 21-day moving average and failed to find support. It even dipped below the psychologically significant $3,000 level.

But Ethereum should see positive pricing pressure as more supply is burned. Since the EIP-1559 upgrade in early August, nearly 360,000 ETH have been burned. Its much-anticipated ETH 2.0 upgrade is predicted to roll out in 2022, and over 7 million ETH are currently staked on the platform.

Here’s Ethereum’s price in U.S. dollars via Coinbase:

Index Roundup

It was a tough week for the entire crypto market, as few cryptos were spared from the sizeable pullback. Trading was relatively muted to begin the week, but the market saw a mid-week sell-off that it hasn’t yet bounced back from.

The Weiss 50 Crypto Index (W50) fell 18.36% as the broad market gave back recent gains.

The Weiss 50 Crypto Ex-BTC Index (W50X) dropped 20.25%, showing that Bitcoin’s performance was slightly better than the rest of the crypto market.

Breaking down performance this week by market capitalization, we see that there were no winners.

The large-caps struggled, as the Weiss Large-Cap Crypto Index (WLC) lost 17.62%.

Mid-cap cryptocurrencies suffered the worst of it, with the Weiss Mid-Cap Crypto Index (WMC) declining 23.37%.

The small-caps were able to limit losses better than the rest of the market due to a sharp rebound after the initial drop. The Weiss Small-Cap Crypto Index (WSC) fell by 13.96% after the dust settled.

The small-caps outperformed again because they saw some relief after the mid-week sell-off. But this extended period of outperformance for small-caps won’t last unless Bitcoin and the large caps can regain traction and lift the broad market with them.

Notable News, Notes and Tweets

•  Pomp criticizes a Bloomberg article the claims China outlawed all crypto transactions.

•  Michael Saylor highlights how Twitter (NYSE: TWTR) users can now be paid in Bitcoin.

•  Tyler Winklevoss dismisses recent headlines as fear, uncertainty and doubt (FUD) while talking about buying the dip.

What’s Next

Much of the news dominating today’s headlines addresses China’s resistance against cryptocurrency adoption. While the market has pulled back, the reaction is likely overstated. China is simply reaffirming its stance from 2017 outlawing business dealings.

Bitcoin’s correlation with the S&P 500 has been higher than usual lately, but that is likely driven by macroeconomic uncertainty. However, its correlation fluctuates over time, and it remains a hedge against an uncertain future caused by reckless fiscal and monetary policies along with other macroeconomic risks.

Meanwhile, crypto adoption is expanding without China, and Twitter’s crypto feature rollout is an important step for the industry.

Twitter has over 300 million active users, and these functionalities will certainly stimulate greater interest. More companies will likely follow Twitter’s lead, which will drive more transactions and even greater community involvement. That should help prices moving forward.

Best,

Sam Blumenfeld