Bitcoin Death Cross Confirmed After Latest Sell-off, Biggest Risk Factor is Now a Breakdown in S&P

The extreme divergence between the basis on CME futures and cryptocurrency exchanges has reconverged. September futures, already at 0.1% APR, are expected to get nuked backward.


The crypto market has experienced another rout that started into the weekend and has spilled into this new week.

Bitcoin’s price fell to about $32,100, and Ethereum even lower to $1,945. The total cryptocurrency market cap is now at $1.4 trillion, down more than 46% from May 12 peak. ETH -0.15% Ethereum / USD ETHUSD $ 4,032.52
-$6.05-0.15%
Volume 14.46 b Change -$6.05 Open $4,032.52 Circulating 118.06 m Market Cap 476.06 b
1 d Canadian Group-Retirement Savings Company Adds Bitcoin and Ethereum to its Plan 1 d Robinhood’s Cryptocurrency Wallet Waitlist Grows Over 1 Million, says CEO 1 d $5.5 Billion AUM Pension Fund Buys Bitcoin and Ether Because They Can’t “Ignore” It Anymore

The sell-off ended up liquidating 153,599 traders for $1.01 billion in the last 24 hours. With this drawdown, the extreme divergence between the basis on CME futures and futures on crypto native exchanges has now pretty much reconverged.

Could this mean we’re in a bear market, the multi-year downtrends post-blow-off every halving “cycle”? Jason Choi, General Partner at crypto fund The Spartan Group, argued that’s not a good benchmark to go with.

This is because we now have a diminishing impact of supply reductions and a completely different set of market participants which involve institutions. Also, BTC dominance is falling on HTF/ no longer bellwether for future cycles.

Crypto tumbled as Asian stocks dropped on Monday, with investors still mulling the implications of a surprise hawkish shift last week by the US Federal Reserve.

The Treasury yield curve has flattened further, with 30-year yields dropping below 2%, to as low as 1.9990% for the first time in more than four months. Benchmark 10-year U.S. Treasury yields also fell to the lowest since early March at 1.4110%.

After falling to $1,60 per ounce last week, gold is seeing a slight jump today, going as high as $1,780. The US dollar meanwhile hovers near the 10-week high at 92.2.

As we reported, St. Louis Fed President James Bullard further fuelled the sell-off by saying the tapering talks have started and that it was a “natural” response to economic growth quicker than expected inflation.

This week will continue to be a volatile one, with several Fed officials, including Chairman Jerome Powell, to testify before Congress on Tuesday.

The drop in prices came after Bitcoin mining farms in Sichuan were closed down, which sent the hash rate crashing.

While price generally moves Bitcoin’s hash rate and not the other way around, buying into the false narrative that hash drops lead to price drops has made it “come true momentarily,” said trader and economist Alex Kruger.

Based on on-chain data, miners are actually not selling their BTC and continue to HODL the coins. Charles Edwards of Capriole Investments wrote,

“Now that Hashrate drops from bans have more or less played out, the biggest risk factor for further Bitcoin price plunges is a breakdown in the S&P. This is a very real and prominent risk to Bitcoin here.”

Despite the weak momentum in the market and the death cross finally confirmed, which occurs when the 50-day moving average drops below the 200-day, Bitcoin remains in the $32k-$40k range.

According to Jonathan Cheesman, head of over-the-counter and institutional sales at crypto-derivatives exchange FTX, “backtesting isn’t statistically significant” on the signal for Bitcoin.

When bitcoin experienced a death cross in March 2020 that was at the start of a yearlong rally, while that of in 2018, it solidified the bear market. So, it’s to be seen just how things play out.

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