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European Equities

European shares open lower to begin the day. Stocks remain under pressure, Eurostoxx -1.2 percent, Germany DAX -1.3 percent, France CAC 40 -1.4 percent, United Kingdom FTSE -1.2 percent, and Spain IBEX -1.4 percent.

As previously said, this is due to some catch-up to Wall Street’s late loss yesterday, as well as the risk mood being more gloomy so far today. Nonetheless, US futures have pared initial losses, with the S&P 500 down 0.1 percent and the Nasdaq down 0.5 percent. Dow futures are now trading up by 0.1 percent.

However, we’ve already seen this news twice this week. Will the third time be the charm for those looking to purchase a dip? Or would the indicators indicate that stocks will see a deeper pullback before the weekend?

Crypto

• Bitcoin and Ethereum have reached alarming levels, with the downturn likely just beginning.
• The cryptocurrency market capitalization has dropped to 1.83 trillion, down 7.3 percent in the last 24 hours. The selloff, as expected, was initiated by dramatically unfavourable sentiment in US equities markets and exacerbated by the loss of important support levels.
• Bitcoin has dropped back to around $38.8K. The magnitude of the drop from the high at the start of the regular session in New York to the bottom at the start of Asia is greater than 12%. The upper border of the downward price channel that has governed bitcoin since mid-November has proven unshakable (so far).
• Another worrying fact is that Bitcoin’s share has risen to 40.2% of the crypto’s total cap. The implication is that investors are breaking out of altcoins even more sharply, as they are less confident in the ability of smaller coins to withstand the titans’ fall.
• Without a sharp intraday reversal (chances for this are minimal), we can confidently expect an acceleration of long position liquidation in Bitcoin and further drawdowns. There is nowhere to look for support until the $30-33K area on the chart.
• Ether has lost up support at $3K, swiftly falling down into the late September consolidation range, finishing at $2.85K. Because of the escalation of the selloff, $2K is the goal of the initial fall wave.
• Earlier in 2021, the area of 30K for Bitcoin and about 2K for Ether was the bottom of a significant decline. This drew buyers, and the market as a whole managed to record highs. During that period, the total capitalization of cryptocurrencies fell to $1.2 trillion. If the initial two cryptocurrencies were aiming for lows last summer, it is reasonable to expect the entire market to return to those levels.
• However, the external background was quite favourable at the time, since the US market was returning to growth with drawdowns in the 5% level, having previously exceeded that threshold earlier in the year. The persistently poor backdrop in stocks lays the stage for a deeper downturn in crypto. Before we see a new wave of long-term buyer inflows, the crypto market’s value might fall by half to the $830-900 billion range. This means that Bitcoin might fall to $20,000 in the near future.