Weekly Markets 1.16
3 December 2021: Another difficult week has seen both cryptocurrencies and stocks fall further. Many coins have fallen over 10% again with fear still strong in the market. In stocks, the tech sector has been especially vulnerable as the NASDAQ is down over 1,000 points from its all time high. Could the bull run be over? Well, not so fast.
Despite many cryptocurrency assets being down over 20% from all time highs, major coins like Bitcoin are not only still in an uptrend, but are also at short term support. This combined with an overall fearful market are potentially creating the grounds for a large scale reversal as Q4 enters its final weeks.
The main news stories of the week are available below:
Terra (LUNA) has massive week despite market sell-off (Decrypt)
Cryptocurrency executives called to testify in front of US Congress (BBC)
- Large traders dominate Ethereum DEXs as fees too high for retail (CoinDesk)
Stocks fall lower reportedly on fears over Omicron COVID variant (Wall Street Journal)
Turkey's currency continues to deteriorate (Associated Press)
- Barbados becomes world's newest republic (NPR)
Crypto Economy & Markets
Many coins within the top 50 in market cap have sunk double digits over the last few weeks. Bitcoin, for example, is over 20% off its all time highs. While looking at the broader market however, there is a growing probability of a reversal coming. The total market cap is sitting just above support and the market is experiencing a sentiment of extreme fear.
The total cryptocurrency market has fallen 7% over the past week with the majority of the sell-off taking place over the past 24 hours. The total market is sitting just above support at the bottom of the current 6 month price channel. At 2.4 trillion, this is right around the previous total market peak back in May 2021.
Over the past week, Bitcoin is down nearly 2% after a nearly 7% decline in the past 24 hours. Bitcoin is sitting just above support in the upward price channel dating back to the July 2021 reversal & rally.
While this has been a sustained decline for Bitcoin, support just below $52,000 should prove to be durable. If this support level holds, expect a potentially sharp bounce back towards the 50 day moving average and maybe even to the top of the channel. The market sentiment is there for such a rally. Of course, there is still the possibility that Bitcoin does breakthrough current support. This would more or less confirm the bearish trend.
Watch this area over the weekend for a definitive direction on Bitcoin. There are still a few weeks left here in Q4, so the possibility we see a $70k Bitcoin or higher is credible.
Ethereum and other alt coins have been matching or outperforming Bitcoin through this downtrend. Terra even managed to rip a 50% gain for the week. The focus for this article will be on Ethereum. ETH is up 3% over the past week, sitting only 14% off its all time high.
Ethereum has been routinely beating the market most of the bull run. While we could see some more downside, it would be a surprise to see Ethereum not get to $5,000. Although, people still say that about Bitcoin reaching $100k. It is also important to remember a growing portion of the capital on the network is effectively locked into ETH2.0 staking.
Over the weekend, watch to see if Ethereum can reverse back above support or if it continues lower. The bottom of the channel is at ~$3,800, but it is still a small probability.
World Economy & Markets
The big focus this week will be on the US stock market. For the majority of November into December now, the stock market has either been stagnate or declined. The S&P 500 is nearly 5% off all time highs but has just broken down below a key support level for the second time. While last time the market did reverse and head higher, this time there is no guarantee it will react the same way.
The recent declines in the US500 have mostly been drive by sell-offs in the tech sector - notably Adobe (ADBE) and Tesla (TSLA). Although a different market than crypto, it is important to watch indexes like the US500 because many of the major institutions choosing to invest in crypto are also doing so to diversify their existing fiat-based portfolios.
Look for either extended volatility or lower prices on most cryptocurrency assets over the short term. Many coins, like Bitcoin, are sitting above short term support - dating back to July. The market is a state of extreme fear, setting up what could be close to the bottom of this pull back.
Some other factors to consider, however, include:
- US Federal Reserve looks poised to go through with tapering, potentially raising rates
- Stocks have been stagnate or declining for weeks now
- The media is pushing the latest COVID variant which has promted new lockdowns in Europe & Asia
Any one of these issues could create the environment for an actual market correction or even crash. It is still early for such an event, but after the massive gains in both stocks and cryptocurrencies since the onset of the pandemic, anything is possible.
Coming within the next week from RekTimes includes:
- Article on El Salvador's Bitcoin City (Monday)
- Article on Algorand (ALGO) (Wednesday)
- RekTimes Weekly Markets 1.15 (Friday)
- RekTimes Top 10 Coins - December (Friday)
Best of luck over the next week!
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