Stocks, Gold, Bitcoin, & Crypto All Crash Hard in Sync as US Dollar Gains Strength
In another iconic 2020 multi-asset sell-offs to start this fragile week, bitcoin went down to nearly $10,300 level after losing almost 8% of its value yesterday.
The leading digital asset is currently trading around $10,450, a level seen earlier last week, with ‘real’ volume keeping under $2 billion.
As trader Cole Garner notes, “25-35% retraces are the norm in Bitcoin bull markets. This is an opportunity.”
#Bitcoin 200 week moving average: $6700 pic.twitter.com/10ev8haKq8
— PlanB (@100trillionUSD) September 22, 2020
Naturally, altcoins followed suit and crashed even harder in tandem with BTC. Among the top cryptos, Polkadot (DOT) got hit the hardest, followed by BNB, Ether, and LINK.
Given that DeFi tokens rallied the most, they are also the ones bearing the brunt of the bears. The average DeFi token has been cut in half this month, with Tendies being the biggest loser at -25%.
A handful of tokens are still recording gains led by SAKE (+80%) and SASHIMI (+42%).
Moving in Synchronicity
Despite bitcoin’s losses, the digital asset is holding on to the key psychological level $10,000 strongly. Bitcoin “has traded around this level with few exceptions since mid-2019. The average price over the last 200 days is now just shy of $9,200,” noted analyst Mati Greenspan.
The flagship cryptocurrency, which is seeing “incredible stability,” is being primarily driven by stocks that are dealing with a two-month low.
“All asset classes moved in synchronicity: stocks, bonds, metals, crypto, etc. Non Crypto – Crypto correlations spike when large sentiment changes occur and realized volatility pops. Incredibly, for crypto traders now the macro often matters more than the micro,” said trader and economist Alex Kruger.
The trader expects markets to chop until the elections, which means reducing the risk exposure. For bitcoin, if it gets pushed to $9ks, “hell would then break loose,” he said
But many are expecting bitcoin to decouple from the equity market in the coming months if the S&P 500 continues to plummet.
“Post halvening and reduced derivative trading volumes fundamentally reduce BTC’s sell pressure against bullish fundamentals of an anti-inflationary hedge,” said on-chain analyst Willy Woo.
The center of it all
Driven by momentum, Dow Jones Industrial Average shed as much as 900 points while S&P 100 ended down about 9% from its record close on Sept. 2nd. Wall Street’s fear gauge, CBOE Market Volatility Index (VIX) shot up 17% to its highest level in almost two weeks.
The main indexes tumbled over the concern about new lockdowns in Europe and fear of delay in fresh stimulus from Congress after the death of US Supreme Court Justice Ruth Bader Ginsburg.
BREAKING: World Health Organisation says the past week saw the highest number of reported coronavirus cases in a single week since the pandemic began.
— The Spectator Index (@spectatorindex) September 22, 2020
Also, with the Federal Reserve and other central banks already committed to keeping rates suppressed for a long time, “there doesn't seem to be much in the way of action from them for markets to look forward to,” said Greenspan.
Even gold went to $1,885 level before recovering above $1,900. According to trader Bob Loukas, “Anything in the $1,700's just buy it hard.”
And at the center of it all sits the dollar.
The US Dollar index, the main benefactor of yesterday's actions, is at its highest level since July – under 94.