We’re used to the crypto market acting up. When it dumps, there’s fear. When it rallies, there’s extreme greed. It never seems to be in just the right spot. Crypto and Bitcoin always suffer collateral damage of what’s occurring in the market, and this time it’s no different.
- Insider trading kicked off a cascade of sell-offs
- Bitcoin has yet to fully decouple from the stock market
- Markets could rally after a brief cool-down period
It’s the unwritten rule that always holds true. The stock exchanges determine market sentiment, and crypto was caught in the middle of it all.
This all began with results announcements. Netflix said it had added only 8.29 million users in Q4 2021, lower than the 8.5 million onboarded in Q4 of 2020. When the market heard, Netflix lost more than 20%, fuelling speculation of insider trading. The market run was too good to be true, wasn’t it?
That’s one catalyst, but let’s take a look at some of the others.
The FUDding crypto-verse
Whichever way you look at it, Bitcoin’s minor slips should be viewed with a broader lens. Bitcoin’s down by 38.4% since its November all-time high, yet it still performs better than the SP500 by 47.5x and Gold by 84.5x.
And despite no decoupling of Bitcoin prices from the stock market in sight, investors sought risk-on assets over the past five years. Just check our article on how the US 10-Year Treasury Bonds Yields played into crypto’s favor.
Despite the breakout on the downside, activity on the network increased by 9.3%, hitting an absolute high.
This didn’t stop more Russian FUD from being priced into Bitcoin’s activity as Russia’s blockchain and political plays strike fear into the market. Russia banning the use of mining and crypto transactions is not an immediate catalyst, but it does build on other fear-generating news events, like the ongoing tense situation with Ukraine.
Liquidations and financial losses were lower at the start of 2022 compared to the sell-off that occurred in May 2021, when they totalled more than US$1 billion. The worst might not be over, because the market hasn’t capitulated yet. There might be more room to the downside!
Now it’s a waiting game. Trends and macro-data show we could be in for reversals or continuations. While weekly indicators could play out over the course of a couple of months, the potential for a trend-reversal is not out the window.
And if that happens, it will be the 5th successfully recorded reversal pattern after breaking outside the bands – and towards the upside for the better of the market.
Doomsday doesn’t play well
Markets adore doomsday scenarios, at least those who are shorting like crazy. But leveraging is what leads to the large flush-outs. We’re not mirroring May 2021 exactly, but there’s a pattern here. Open interest always leads to some sort of shakeout. Could it be to the upside?
What’s going on under the hood of the crypto market can’t and shouldn’t be ignored. We know institutional demand is growing. And price action always follows as investors want to get exposure to risk-on assets – essentially to not lose money!
If panic selling is on your radar, then you should degen a little less. Why? Because crypto’s activity follows a pattern. What comes down always goes back up, maybe not immediately. Investing in strong projects, paired with general market cycles, is yet to prove that thesis incorrect.
Banter wisdom
The market took a beating on every corner. At least the beating wasn’t because of crypto, but due to greedy Wall Street predictions. Either way, this is the best opportunity to begin your Dollar Cost Averaging strategy – and you’ll thank us later!
We believe that there is a relief rally on the horizon, so the most important thing to do now is to not sell out of fear and panic. The technicals are all pointing to relief in the near term. Bitcoin has to bounce, and test a lower high, if we’re continuing on a downward trend.
When the markets bounce, that’s the sign to take money off the table if you are feeling any discomfort. But if you are a long-term bull on crypto as an industry, patience and timely buys in the dip will yield you the best entry points to your favorite altcoins.
