Tuesday morning's trading session continued a large sell-off in Bitcoin, which recently lingered near 41k in the prior weeks before selling off to roughly 29k. However, dip buyers that have been waiting for the chance to scoop up the largest-cap cryptocurrency under 30k were finally given one. Or at least briefly, before BTC sprung back over.
The 30-31k area happens to be a support level many are watching, as it holds lows dating back to 5/23 and 6/08. With that said, Bitcoin's main risk continues to be its volatility. Large price swings make it less appealing for institutions that cannot place their clients in such risky investments. This is especially true given that mainstream institutions still use the archaic buy-and-hold strategy. As most institutions do not use a risk-management system, we can expect that cryptocurrencies will have to stabilize further before these types of investors join the market.
On the other hand, one could make the case that recent volatility in the general market can be tied to the crypto space as well. Or, at the very least, a further correlation has arisen between Bitcoin and stocks (specifically the S&P 500). If this is true, we can begin to watch BTC, along with the major indices for price correlation or inverse price movement, depending on how the space unfolds. Going forward, this would be a positive sign for longevity and help further validate cryptocurrency's presence, making them easier to trade from a risk management perspective.
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ETF Summary
- S&P 500 (SPY): 425.46 high to clear.
- Russell 2000 (IWM): 221.13 support. 230.95 resistance.
- Dow (DIA): 332.68 support.
- Nasdaq (QQQ): 342.80 needs to hold as new support area.
- KRE (Regional Banks): 63.63 support.
- SMH (Semiconductors): 245 support.
- IYT (Transportation): 254.65 support.
- IBB (Biotechnology): Needs to hold 159 level. 163.63 resistance to clear.
- XRT (Retail): Back in a bullish phase with second close over 9.30 the 50-DMA.
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
