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Crypto Crash or a Bottom?

Several headline news today scared investors. The selling started as cryptocurrencies collapse earlier in the day as news circulated that China's central bank reiterated the banning of this popular digital currency. In the afternoon, the Federal Reserve also released its minutes to their latest policy meeting, suggesting the economy is picking up speed. Recent inflation data is also hinting prices are beginning to accelerate. Earnings reports from several major U.S. retailers further reaffirm consumers are upbeat but most importantly, retailers have successfully passed on higher costs to the consumers. The U.S. bond yields jumped sharply higher into the close. The risk-off market scenario and reports indicate Iran and its negotiating partners have made significant progress that may lead to the lifting of U.S. sanctions caused oil prices to drop.

Cryptocurrency traders were spoked by China's new rules to curtail the loopholes that enabled Chinese investors to trade this popular asset. However, the news that China's top financial associations issued warnings to their members not to offer cryptocurrency services to its exchanges and its clearing and settlement operations ignited the sell-off.

The announcements soon sent the cryptocurrency market into what appears to be a panic sell-off. The largest cryptocurrency, Bitcoin, plummeted 12,960.82 points to an intra-day low of 29,925.20 or -30.22%, before rebounding to close at 37,421.57 or -14.16% for the day. The digital currency lost over 53.86% of its value in the last month alone. Other cryptocurrencies such as Ethereum, Litecoin, Dogecoin, and others also succumbed to heavy selling.

The popularity of cryptocurrencies with retail investors over the near term has led the asset class to grow to a market-market cap of over $2 trillion in a relatively short timeframe. The question then becomes will further selling in cryptocurrencies trigger forced selling and liquidations, thereby increasing global risk aversion and increased volatility in other asset classes?

Enclosed below are near-term, intermediate-term, and longer-term technical outlooks of Bitcoin (BTCUSD). Although it appears Bitcoin rebounded from potentially crucial technical support today, the technical actions over the next few days and weeks will help to confirm if this indeed a pivotal bottom or just a dead cat bounce. We recommend Bitcoin and cryptocurrency traders closely monitor technical support and resistance levels to determine the next directional trend.

Source: Charts courtesy of

Source: Charts courtesy of

Source: Charts courtesy of

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