Equity Markets Turmoil Could Push Bitcoin Below $10K, Say Analysts
Bitcoin (BTC) is once again taking cues from the stock markets and prices may fall below $10,000 if equities see further sell-off, according to analysts.
- The top cryptocurrency fell by 4.5% on Monday to register its biggest single-day decline since Sept. 4.
- That came as global stock markets nursed sharp losses and the safe-haven U.S. dollar gained ground on renewed coronavirus fears and uncertainty over the 2020 U.S. election.
- Bitcoin is currently priced at around $10,460, down nearly 2% on the day, according to CoinDeskâs Bitcoin Price Index.
- âSustained risk-off in broader equity markets will lead to heavy offers across major cryptocurrencies,â Matthew Dibb, Stack Fundsâ co-founder and COO, told CoinDesk. âBitcoin may revisit September lows [around $9,870].â
- European equities are reporting moderate gains at press time, however, futures tied to the S&P 500 index are down 0.3%, signaling scope for extension of Mondayâs sell-off.
- Historically, September has been a weak month for the S&P 500 and the index performs poorly in October in the U.S. election years, according to crypto analyst Lark Davis.
- âAs such, bitcoin could be in for some big bumps over the next six weeks,â Davis tweeted.
- A potential recovery in stocks may have a little positive impact on bitcoin, unless it is accompanied by an uptick in precious metals like gold, according to Dibb.
- âWhile Nasdaq recovered towards the end of Mondayâs session, our concern in relation to bitcoin is its heavy correlation with gold and silver, which are trading further down [Tuesday],â he said.
- The 60-day positive correlation between gold and bitcoin strengthened to record highs earlier this month.
- Gold is currently trading near $1,900 per ounce, representing a 0.4% decline on the day, and fell nearly 2% on Monday. Meanwhile, silver dropped by 7.6% Monday.
- Bitcoinâs daily chart (above left) shows a âbear flagâ breakdown â a sign the bounce from the recent low of $9,869 has ended and the pullback from August highs above $12,400 has resumed.
- âThe cryptocurrency has breached the horizontal support of $10,500 (February high) and could slip to $10,000,â Patrick Heusser, senior cryptocurrency trader at Zurich-based Crypto Broker AG told CoinDesk.
- Goldâs descending triangle breakdown also suggests scope for deeper declines.
- Dibb is also keeping a close eye on the U.S. dollar index (DXY), which tracks the greenbackâs value against major currencies.
- âA breakout of the USD from its two-month consolidation will likely lead to continued selling and pressure on Bitcoin,â Dibb said.
- The DXY has largely been restricted to a range of 92.00 to 94.00 since the end of July.
- A move above 94.00 would confirm a breakout and may weigh over bitcoin.
- Bitcoinâs big move from $9,000 to $12,000 seen in the second half of July was accompanied by a broad-based sell-off in the U.S. dollar.
- Federal Reserve Chair Jerome Powell will testify before the U.S. Congress on Tuesday and is expected to reiterate the central bankâs commitment to holding interest rates low for a prolonged period.
- Since the markets have already priced in low rates, stocks may not see a big relief rally.
- Crypto Hedge Fund Looks for $50M to Buy DeFi Tokens Amid Market Pullback
- Market Wrap: Bitcoin Clings to $10.4K; Ether in Smart Contracts Highest Since 2016
- Supply of Tokenized Bitcoin on Ethereum Now Tops $1.1B: Hereâs Why
- Bitcoin Traders Say Options Market Understates Likelihood of Chaotic US Election
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.