The crypto market has been moving in tandem with the traditional markets of late. Just like equities, even this asset class has succumbed to bears, reflecting the macro weakness.
Blame the correlation?
Nasdaq registered its worst one-day drop since October 2022. The S&P 500, on the other hand, closed 2.3% lower, ceasing its longest streak without a 2%+ decline since 2007. Stocks from this index erased over $1 trillion market cap in aggregate, with the ‘Magnificent 7’ alone accounting for over $600 billion.
The correlation between Bitcoin and Nasdaq, S&P 500, and Gold has been hovering in the positive territory. A recent report by K33 research pointed out that the bond shared between BTC and US equities has reached “familiar highs” from 2022.
Thus, if one market dips, the others will likely follow course. The same goes with recovery as well.
Millions wiped out within the blink of an eye
There was blood all over the crypto streets during the early Asian trading hours on Thursday. Bullish traders were mercilessly rekt. At press time, one-hour crypto liquidations stood north of $1.5 million, out of which $1.25 were long positions.
Ether registered one of the heftiest dips. It was down by more than 8% at press time, and resultantly, accounted for around half of the total wiped out positions. On Binance, one trader lost over $4.63 million on his ETH/USDT trade.
The second largest crypto asset slipped down by 5 ranks when compared to its other TradFi peers. It was displaced by the likes of Vanguard, Mastercard, P&G, Samsung, and Oracle.
Meanwhile, BTC was seen trading around $64k, down by around 3% over the past day.
ETH/BTC pair drops to its knees
To a fair extent, crypto managed to shield itself from the German government's pressure, the Mt. Gox distribution, and the Ether ETF ‘sell the news’ bearish traders. Just when the fundamentals seemed to be getting stronger, the market gave in to bears.
The ETH/BTC pair has been getting weaker of late. At the moment, it is revolving around levels last observed in May, with the relative strength index falling below its SMA to a multi-month low in the oversold region.
While this doesn’t seem bullish right off the bat, RSI bottoms usually serve as trend-reversal signs. On most occasions when the reading has hovered around the current lows, notable bounces have followed. Several traders and analysts feel that the bottom for this pair is almost in.
Trader, investor, smart money trends
Accumulators have been capitalizing on the dip and amassing coins.
On-chain data pointed out that a particular “smart money” address scooped in 244 BTC worth $16 million when the price dipped. Since mid-July, he has bought over 921 BTC for $60.6 million. However, his average buy price of $65,821 remains to be higher than the current market price, suggesting that his holdings are currently underwater.
Profit booking has also been parallelly taking place. Right before the dump, a whale sent 10k ETH tokens to Kraken. Nevertheless, he continues to hold over 56,639 ETH worth $188 million.
Is panic spreading like wildfire?
The crypto F&G index, meanwhile, continues to flash a neutral reading. This indicates that market participants’ fear and greed are under check.
That, however, does not seem to be the case with stockholders. The volatility index, VIX, jumped by around 23% over the past day and hit its highest level since April 2024. Tech stocks are under pressure and dip buyers are seemingly nervous.
Given the strong correlation the markets share at the moment, it remains imperative for investors across the board to take calculative calls rather than succumbing to fear.
At the end of the day, investor psychology is what makes or breaks trends in the market. Investors are the ones who possess the keys to both bullish and bearish locks.
Based on how they are triggered by macroeconomic catalysts like the FOMC meeting outcome and other policy-related announcements, the price pendulum would change its course accordingly.
