We’re at an interesting juncture, in both traditional markets and crypto markets. There are positives and negatives but, for now, investors are giving into bearishness across the board.
Looking at the US session closing just now, equities fell en masse and yields dropped. Essentially, only gold and bonds gained, in a classical risk-off move.
In case you missed the news of the Evergrande debacle in China, the idea that it could drag down China's whole financial system is dragging down the world economy as well. I mention the positive and negative because (specifically in other markets) the fundamentals that pushed us higher, such as accommodating Fed policies and recovery from the covid crisis, are still there. It’s just that now is a better time to hold cash and wait.
The fear is undeniably seeping into crypto markets. From where I’m standing, there’s no real cause for the retracement we’re seeing besides the fact that large funds, and maybe smaller investors as well, would rather cycle into cash or, at least, less risky assets. The correlation between the S&P500 and crypto is peaking.
BTC is down more than 7% on the session, currently at $43,800. The BTC dominance is growing as the market falls, highlighting that investors are indeed shying away from risk and going back to safety. In the crypto world, that’s BTC.
Alts are suffering to varying degrees. While SOL and ADA are matching BTC, other coins, such as BCH, MATIC, LINK, and DOT, are falling further, all down around 10%.
Away from short-term price action, we are still seeing inflows into crypto-linked products (trackers), which suggests that people with no crypto infrastructure are still looking for exposure to the asset class.
It is also interesting to hear Robinhood is testing wallet and crypto transfer features in its app. Again, I can't see that as anything else but a positive. It is a slow transition and integration of cryptocurrencies in all financial providers and processes.
Oh, and in case you were wondering, long-term holders seem to be growing, not decreasing. Coins spent are newer, not older, and indicate an accumulation phase, not an exiting.
No surprise here, right. We’ve been talking and expecting new all-time highs for the past few days.
You can probably feel it, see it, hear it. Crypto markets are higher. We haven’t reached new all-time highs but, boy, are we close!