Both traditional stock market and crypto market plunged 5% – 10% today. This price action can be attributed to 3 factors: (a) Yesterday’s J Powell’s speech (b) Profit Takers exiting market (c) Increased number of COVID19 cases amid reopening of businesses.
For last few weeks, we saw crypto market decoupling from stock market. Yesterday, Bitcoin bulls tried to cross 10k resistance while SPY 500 was almost near all time high. But after hearing Fed’s decision of providing more stimulus into the market, maintaining near zero interest rates till 2022 and expecting high unemployment rate, many investors could not digest this news easily. Futures also went red with world’s financial market plunging 2% – 5%. When the market opened today, almost all assets reacted to same fear.
Since the ugly dip of March 2020, many stocks and cryptocurrencies have made multifold 100% return. Maybe today’s dip can be associated with profit taking strategy for many investors.
And lastly, the COVID19 cases are increasing worldwide. While many countries are planning for businesses to reopen, people are still fearful of second wave. If there happens to be a second wave of COVID19, we all should be ready for another nasty dump in financial market. Even with 5% – 10% dump, this market is still in bubble; manipulated by Fed’s stimulus; and not synced with real economic situations.
In this time, Bitcoin and Gold are thought to be safe haven assets. But we saw same fear. Bitcoin almost broke 9k. And if Bitcoin is safe haven, it will rebound to 10k before end of week in bullish scenario. However, if BTC does not hold 9k level, we will be seeing 8.6k.
Disclaimer: This price analysis is not a financial advice. Please do proper research yourself before investing any money.