Crypto Market Crashes Over the Weekend – Analysis, 6 Dec
The crypto market experienced a solid crash during the weekend. The price of Bitcoin sank below the psychological level of €50,000 and even went as low as €38,000 on some exchanges. Ethereum, the second-largest cryptocurrency by market cap, has also suffered significantly. Its price tanked below the psychological level of €4,000 and dropped to €3,200 on some exchanges.
We believe there are many factors behind the current deep correction in the crypto space. Today, we will explain one of them. Last Tuesday, U.S. Federal Reserve Chair Jerome Powell testified before the Senate Banking Committee about the U.S. economy. During the testimony, he expressed concerns about the rising inflation:
Powell's statement triggered speculations about potential monetary policy tightening among the participants in the financial markets - an event that may reduce the pace at which the Fed injects money into the financial system, and affect the price growth of the financial assets negatively. The S&P 500 index recorded another red week price-wise. Because of the recent significant correlation between the U.S. stock market and the crypto market, most of the cryptocurrencies suffered as well.
The rising 2-year treasury rate confirms the increasing expectations of potential monetary tightening in the U.S.:
For the crypto market to resume the uptrend, some positive event must happen to compensate for the negative effect of the potential shift in the Fed's monetary policy.
After the weekend's market flash-crash, the prices of the cryptocurrencies continue to bleed on Monday. According to Coin360.com, one Bitcoin costs €42,067.44 (-3.37%), one Ethereum – €3,519.51 (-5.27%), one DOGE – €0.1354 (-8.71%), and one UNI – €13.79 (-7.99%):
Source: Coin360.com (Daily crypto market performance)
Now, let us analyze the price charts of the leading cryptocurrencies against the euro in the most noteworthy time frames.
In the weekly chart (1W), after the Bearish Engulfing and the Hammer, BTC/EUR formed a big bearish candlestick:
The combination of these candlestick formations is a clear signal that the bears continue to control the market. At the moment, in the weekly chart, we don't see any bullish signal and prefer to stay away from the market.
Moreover, in the daily chart (1D), the price of Bitcoin has dropped below the lower line of the Ascending channel (uptrend):
So far, BTC/EUR has not received enough support from the lower line of the channel (trend line) – an indicator that the bears are stronger than the bulls. That's why the price of Bitcoin may sink further. We can reconsider entering the market and opening a long position, only if the selloff ends and a clear bullish signal forms.
For a potential bullish signal to form, first, in the 1-hour chart (1H), BTC/EUR has to exit the Descending channel (downtrend) upwards:
However, as can be seen from the chart, the price continues its journey within the channel. That's why we will remain in wait-and-see mode.
In the weekly time frame (1W), after the first Long-Legged Doji, ETH/EUR formed another Long-Legged Doji:
This sequence of Dojis indicates that the consolidation continues. However, the second one is much bigger than the first – a signal showing that the volatility is increasing.
Let us remind you that, in the daily chart (1D,) we've been waiting for a buy signal based on the Cup and Handle (C&H) technical formation – a typical bullish pattern:
However, we would like to underline that only if the price surpasses the previous local high, the buy signal will occur. Only in this case, we will enter the market.
In the weekly chart (1W), DOGE/EUR has recorded one more bearish candlestick:
As can be seen from the chart, this is just another mid-size bearish candlestick with a local high and a local low below the previous ones, respectively. As long as this bearish pressure continues, we will stay away from DOGE/EUR.
In the weekly chart (1W), after the consolidation at the resistance line, UNI/EUR has started to decline and has just formed another bearish candlestick:
As long as the price remains below the resistance line, we will stay away from the market and wait for better times.
Stay updated on everything Bitcoin-related with Bitvalex. Bitvalex is a licensed digital wallet and cryptocurrency exchange; learn more about us and blockchain technology and sign up to use our services.
The analysis is purely informational and does not constitute investment, financial, trading, or any other sort of advice and you should not treat any of Bitvalex's content as such. Bitvalex does not recommend that any cryptocurrency should be bought, sold, or held by you. You are solely responsible to conduct your own due diligence and consult an advisor before making any investment decisions.