• Bitcoin (BTC, Tech/Adoption Grade “A-”) is retreating from another negative headline from China, and it now trades around $38,000.
• Ethereum (ETH, Tech/Adoption Grade “A-”) is having a worse day, down 14% and trading at about $2,450.
• Bitcoin’s market dominance increased to 44% after bouncing off of the 40% level on Wednesday.
Bitcoin and the broader crypto market are fighting more negative news developments today, with China both reaffirming its stance against crypto’s volatility and barring financial institutions from providing related services.
As usual during periods of market turmoil, Bitcoin has held its value better than the rest due to its relative status as a crypto safe haven and the largest cryptocurrency by market capitalization.
Many technical traders are looking at the breakdown of key longer-term supports. After the big correction Wednesday, the King of Crypto closed below its 200-day exponential moving average (EMA), and traders are eyeing the 21-week EMA as a signal of this bull market’s health. We’ll see if Bitcoin can maintain itself above the latter after Sunday’s close.
Looking at a shorter-term view, Bitcoin still trades well below its 21-day moving average, which could potentially provide resistance during a recovery. Overtaking this level would be a positive sign, but Bitcoin could easily go through an extended period of price consolidation. In fact, a period of sideways trading followed the 320-day lows established in 2017 … right before that year’s parabolic bull run.
Here’s Bitcoin’s price in U.S. dollars via Coinbase Global, Inc. (Nasdaq: COIN):
Ethereum has slid more than Bitcoin over the last several days after its meteoric rise earlier this month. As it stands now, the second-largest cryptocurrency by market cap is down about 44% from its all-time high set on May 11.
Ethereum is trading in a wide range between $2,300 and $2,900 since it established a low on Wednesday — well below its 21-day moving average. A change in market sentiment would go a long way to retaking it, but that would require a big move.
Here’s Ethereum’s price in U.S. dollars via Coinbase:
Index Roundup
Losses were commonplace during the seven-day trading week that ended Thursday, with very few cryptocurrencies left unscathed.
While Bitcoin usually manages to hold its value the strongest during volatile periods, it still took a beating from a barrage of negative news articles and worsening market sentiment.
We saw Bitcoin’s market dominance bounce off of the key 40% level, but not in the way most traders had hoped. Instead of leading the market higher before a new wave in altseason, it appears we may have entered a neutral period before the bull market resumes.
The Weiss 50 Crypto Index (W50) fell 21.43%, as almost the entire crypto market saw a big correction.
The Weiss 50 Ex-BTC Index (W50X) lost 23.26%, showing altcoins were not exempt.
Breaking down this week’s performance by market capitalization, we see that the correction was all-inclusive, and there were no significant deviations with any market cap group.
While the largest cryptocurrencies held their value the best because they are the most established, they still dipped with the broader market. The Weiss Large-Cap Crypto Index (WLC) decreased by 19.65%.
Mid-cap cryptocurrencies underperformed the most this week but not by a wide margin. The Weiss Mid-Cap Crypto Index (WMC) dropped 27.18%.
Small-cap cryptocurrencies struggled with the rest of the crypto market, with the Weiss Small-Cap Crypto Index (WSC) falling 24.77%.
Altseason took a serious hit this week after a sustained period of outperformance. While this bull run is likely far from over, altcoins will likely take a break until Bitcoin can reestablish itself and lead the way higher.
It’s possible and likely we see a consolidation period for not just Bitcoin but the entire crypto market before a second wave can bring the industry to new heights.
Notable News, Notes and Tweets
• Pomp dismisses the recent news from China as FUD and emphasizes strong fundamentals.
• MicroStrategy Inc. (Nasdaq: MSTR) CEO Michael Saylor claims “volatility is the price you pay” for sustained outperformance.
• Institutions are ignoring the naysayers and buying the dip.
What’s Next
Last week, we mentioned that we could face significant volatility in the short term. We definitely saw that this week, with the broader crypto market suffering a significant pullback.
Substantial corrections of up to 40% happen in this still-nascent space, and there were multiple declines of this size during the 2017 bull run.
Bitcoin has seemingly found a bottom, and there may be an extended period of consolidation before a second — and potentially more explosive — phase of this bull market.
The negative headlines coming from China should have only a short-term impact. For those who have been following the crypto market for a long time, this is nothing new. China has repeatedly taken an anti-crypto stance, and none of this is particularly surprising.
Altseason appears to be on hold for now, but that could change if Bitcoin manages to find its momentum again. For now, fundamentals are strong, adoption is increasing, and central bank printing presses are firing on all cylinders.
Best,
Sam
