Bloody Monday: USD Spoils the Party as Bitcoin, Precious Metals, & Stock Market Record Massive Reversals
After last week’s crazy performance, markets are experiencing a massive reversal on the first day of the week.
Starting with Bitcoin, the digital asset had made a yet new all-time high just last night, or for some early Monday morning, at about $24,300 amidst the heightened institutional interest.
But after surging 28% in just last week and breaking multiple levels, today it is bleeding red.
Dropping just under $22,400, BTC/USD rebounded some and is trading around $23,050, down about 2.5% on the back of $5.32 billion in ‘real’ volume.
In tandem with Bitcoin BTC -2.81% Bitcoin / USD BTCUSD $ 41,811.73
-$1,174.91-2.81% Volume 20.61 b Change -$1,174.91 Open $41,811.73 Circulating 18.93 m Market Cap 791.6 b 2 w SEC Commissioner says NFTs Might Fall Within Their Jurisdiction, Gensler Hires Senate Aid for Crypto Policy 2 w A Possible Crypto Recovery Moving Into New Year, Risk-on Sentiments Send The Stock Market to Another Record High 2 w Bitcoin and Ether Dump More Going Into Year-End, ETH Killers Showing Great Momentum , altcoins are falling even harder.
This price action over the weekend was actually led by retail investors than institutional investors. The consistent decline in OI shows that institutional investors were taking profits and missed out on the latest rally.
As per CME’s latest report, asset managers' long positions fell from 544 to 492, while short positions increased from 11 to 26. Leveraged funds' long positions declined from 4,365 to 3,946, along with the short positions that declined from 9,354 to 8,702. Non-reportable accounts also increased in short positions from 506 to 606, while long positions fell from 3,403 to 3,134.
Can somebody summarize why it is logical to buy Bitcoin—other than speculation—in 1-3 sentences?
— Andrew Wilkinson (@awilkinson) December 19, 2020
The jump in price came on the back of the high volume, which is rising rapidly. The futures market has been particularly active, with the aggregate weekly volume of BTC futures hitting $270 billion across derivatives exchanges. Open interest (OI) also reached a new ATH of $8.9 billion on Saturday.
This bullish price action has the BTC perpetual swaps price exceeding the index price with funding rates hitting a peak; excessive funding rates indicate rising leverage. With quarterly futures and options settlement coming up this Friday, more volatility is expected.
Much like digital gold, the risk-off market has precious metals, also having a bad day. Gold fell 2.7% to $1,854 before finding support around $1,874, for now. Silver meanwhile crashed over 9% to just under 25; currently, it is around 26.
S&P 500 futures plunged 2.5% on the first day of the week, right after the Index made a new ATH at 3,722 just before the weekend. Tesla fell 6.3% in pre-market trading on its first day on the S&P 500 index, after catapulting 731% this year.
Today’s winner is the US dollar, which breached above 91, from Friday's low of 89.7. The USD is gaining against several currencies after European nations began imposing travel bans on the UK after it reported a more-infectious and “out of control” coronavirus variant.