We observed some volatility yesterday, with only limited effects. Equities initially dropped significantly but, with Powell’s speech on the rate outlook sounding accommodating, risk assets erased losses. The S&P and Nasdaq ended up closing flat. The 10-year yield took a breather and stayed at 1.34%. Gold also stayed put, currently at $1,805.
Taking a look at BTC, I wish I could say the same dynamic took place, but losses definitely occurred. The strong pullback on Monday took us from the 57Ks to the 47Ks, and then back to 54K. The session yesterday took us down from 54K to 45K. We’re now closing the session at $48,150.
The moves are undeniably powerful: We lost 10% yesterday, translating into 15% in the last two days. The candles both have long bottom wicks which, again, suggests buying power forced some of the sellers back up. Naturally, with such a retracement, many investors will be fearful.
It’s worth noting that a major factor in those large moves down is the size of the derivatives market. BTC futures open interest is close to $20bn with a year-to-date growth of nearly 90%. Many of those traders were hurt: We saw about $5.5B worth of leveraged long liquidations in the past 24 hours… that’s a lot.
Naturally, we’re looking at the upcoming Friday expiry (for about $2.5B notional on Deribit) and a max pain at 40K.
I’m still surprised to see that the BTC Dominance index isn’t rising more than it is. We’re naturally in the green, but still just at 62.70. Although alts are underperforming, they’re holding up well. For my personal trading, I’ve indeed enjoyed the pullback to add not only BTC to my portfolio, but also more speculative coins—and I keep plenty of cash on the sidelines for some more potential pain.
ETH had intraday lows down 24% and closed the day down 11%. Most alts painted a similar picture, and in the case of LTC, XLM, XTZ ,and BCH, went overboard, with drops of 15-20%.
On a final note, Bitfinex and Tether settled with the New York Attorney General’s office, agreeing to pay $18.5 million as part of the settlement.
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