Everything seemed pretty orderly on Sunday night. Bitcoin was doing OK and the index futures were fine, generally speaking.
Fast-forward a few more hours and the landscape doesn’t look the same.
Given its size, Bitcoin led the way amid a “risk-off” trade in cryptocurrencies, with Bitcoin currently down about 7.5% on the day.
Stocks aren’t faring much better, with the S&P 500 down 2.2% and the Nasdaq down over 2.7% at last check.
At the root of all this selling is news out of China and worries about its real estate market due to the issues at Evergrande Group.
While this doesn’t have a direct impact on most U.S. companies, any sort of economic fallout in China could have an impact. Plus, at a time where investors continue waiting on a 5% pullback in the S&P 500 — now down 4.6% from the highs — this seems as convenient as any other excuse.
As for Bitcoin, it’s getting hit much harder than equities, which is drawing additional attention from investors. Let’s take a closer look.
Bitcoin prices came rocketing off the lows in July, following some positive commentary at “The B Word” conference, headlined by supporters such as Ark’s Cathie Wood, Tesla’s (TSLA) - Get Tesla Inc Report Elon Musk and Square (SQ) - Get Square, Inc. Class A Report and Twitter’s (TWTR) - Get Twitter, Inc. Report Jack Dorsey.
After bottoming near $28,800, Bitcoin exploded up through $50,000 and even cleared the 61.8% retracement.
The ensuing pullback was messy, but Bitcoin ultimately held its key moving averages and began to chug higher. That is, until Sunday night and Monday.
Now rolling back over, Tesla has not only fallen back below its key moving averages, but it’s registered a lower high on the chart. While not outright bearish, this is a bearish development for the technicians.
For now, the key $42,000 to $43,000 area is holding as support, just as it did earlier this month amid that nasty correction.
The question now is, can Bitcoin reclaim $47,100? Not only is that a key level on the chart, but it would put Bitcoin back over the 10-week, 50-day and 200-day moving averages.
That’s followed by $48,500, then the $50,000 mark.
On the downside, a break of this month’s low near $42,450 could put the 50-week moving average in play.
Aggressive buyers may consider being long against this low, but more conservative traders will wait for a rotation back above $47,100 or a dip into lower prices.