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Crypto News

Markets Plunge as Cryptocurrency Erases Yearly Gains

Global markets faced significant declines overnight, with Bitcoin falling below $50,000 to its lowest point since February in the early hours of Monday morning. On Binance, Bitcoin reached a low of $49,000, influenced by fears of conflict in the Middle East, recessionary concerns, and a hawkish Federal Reserve.

Ethereum also experienced a sharp decline, hitting its lowest level since January 3rd and resulting in a notable 28% drop within 24 hours. Due to the price drops, $1 billion in crypto futures positions were liquidated during this period, with Ethereum accounting for $350 million of these liquidations.

Adding to market uncertainty, Democratic presidential nominee Kamala Harris is rising in the polls. The uncertainty surrounding her strategy and the negative market sentiment have further impacted the markets.

The S&P 500 fell by 2.9% in broader markets, the Stoxx Europe 600 declined by 2.8%, and the Nikkei 225 Index dropped by 12.4%. The swift declines across global markets have left investors concerned about the near-term future.

Tether Reports Massive First-Half Profits

Leading stablecoin Tether reported $5.2 billion in profits for the first half of 2024, showcasing the strength of its native token, USDT. This performance is a major boost for the crypto market, especially as Tether earned $1.3 billion in net operating profits in Q2. The company holds $97.6 billion in U.S. government debt, ranking it among the top holders globally. If Tether were a country, it would be 18th, surpassing Germany, the UAE, and Australia.

With substantial holdings in U.S. Treasuries, Tether maintains a high level of investment security and financial stability. The company's assets total $118.4 billion, while liabilities stand at $113.1 billion, resulting in a reserve of $5.3 billion that can be redeemed for U.S. dollars if necessary. Recently, the market value of USDT has grown to $114 billion from $91 billion earlier this year, reflecting ongoing growth in the stablecoin and the broader cryptocurrency sector. These figures were provided by the renowned accounting firm BDO Italy.

MicroStrategy Faces Setback with Second Quarter Loss

Intelligence and analytics software company MicroStrategy reported a second-quarter loss, a notable shift from last year's net income of $22.2 million. The net loss per share was $5.74, compared to a $1.52 net income from the previous year. This loss is attributed to a $180 million impairment charge on its Bitcoin holdings, a significant increase from the $24.1 million impairment in the same period last year.

MicroStrategy, led by Bitcoin advocate Michael Saylor, now holds 226,500 Bitcoins as of July 31. The company has spent $8.3 billion on Bitcoin, with an average purchase price of $36,821 per Bitcoin. Despite the impairment charge, this average is well below the current Bitcoin price of $63,278. This increase in holdings since their last announcement in June reflects the company's continued confidence in Bitcoin despite the financial setback.

Crypto Analysis

Bitcoin (BTC)

Bitcoin has experienced an extremely bearish week. At first, it broke its daily structure to the downside at $63,456, as indicated by the blue horizontal line on the chart below. It fell further during the following days and finally tumbling in the early hours of Monday morning to a low of $49,000 on large volume. It has also closed below the 200-day exponential moving average.

A few hours earlier, the price was positioned at a zone of weekly support, marked by the green shaded area and black arrows indicating the relevant swing lows around $58,000.

If this were any other asset, it would be reasonable to believe it is entering a primary bearish phase. However, Bitcoin is not just any asset. Its price has been moving abruptly in both upward and downward directions for several months. Just one week ago, there was anticipation of hitting new all-time highs.

This has happened on numerous occasions recently, which means that price action can be unpredictable, and another violent move to the upside cannot be ruled out. 

The chart has already produced multiple lower lows and lower highs. The warning signs were visible for a temporary top with multiple taps of resistance, shown by the blue arrows, culminating perfectly with the RSI bearish divergence at the most recent swing high on July 29th at $70,079.

The RSI momentum indicator is now in oversold territory, and there is very little in the way of bullish divergences. The force of this downward move has been brutal, to say the least, driven by a major stock market collapse due to possible recessionary issues the U.S. faces and geo-political issues.

However, it is important to remember that Bitcoin is resilient. It has demonstrated its ability to recover even when everything seems bleak. For this reason, it is crucial to trade based on observed trends and to react when changes occur as Bitcoin continues to carve out unusual patterns.

Bitcoin has produced one such pattern, a broadening wedge that has just broken the lower trendline to the downside, as seen in the chart below. This development is significant. Bulls will be hoping for the price to reclaim that trendline.

It is now important to calculate possible downside targets, and Bitcoin is currently spiking the 0.382 Fibonacci level on the monthly chart, derived from the most recent significant swing from November 2022 up to the all-time high, which comes in at $51,506. It is reasonable to suggest that we may try to find some support around this region. The next major level could be at the 0.618 Fibonacci level at $37,746.

Bitcoin: Summary

Bitcoin's dramatic decline over the past week initially entered a zone of support, but a swift overnight move has broken through this support. The price action remains overwhelmingly bearish, with the week closing below the 200-day EMA. The drop below the swing low of July 5th is a notably bearish development and warrants serious consideration.

Although this puts the bulls in a challenging position, it is important to remember that major players may seize value opportunities and potentially drive the market upward unexpectedly. A capitulation bottom cannot be ruled out. As we emphasize each week, it is crucial to follow the price action. The first sign of a bullish reversal would be reclaiming the 10-day EMA. Until then, the path of least resistance remains downward.

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Total 3 Chart (Excluding Bitcoin & Ethereum)

The Total 3 chart, which encompasses altcoins but excludes Bitcoin and Ethereum, has breached a significant zone of support, indicated by the green-shaded area and black arrows marking relevant swing highs and lows around the $540 billion level. The RSI momentum indicator is currently in oversold territory, suggesting that a price reversal might be imminent. However, the intensity of this downward movement may prove too strong to overcome. However, it is also important to note that markets can stay at extreme levels for extended periods, especially if there is an overriding trend. Another significant point is that the 50-day EMA is below the 100-day EMA, which has historically been bearish in cryptocurrency markets and can be a good indication of a primary monthly trend.

Examining the weekly chart, we observe a distinct downward-sloping trend channel that underscores the importance of the previously mentioned daily support zone. Should the price decline further, substantial support is anticipated around the $450 billion level, which aligns with the 200-week EMA. Given that the price has fluctuated sideways along this moving average and price area for approximately a year and a half, there is a possibility that history may repeat itself. As of Monday morning, the price is approaching this critical support area and has broken the bottom of the trend channel.

Total 3: Summary

The Total 3 chart has broken a significant area of daily support, characterized by a confluence with a parallel trend channel and is now sitting on major weekly support. Due to an overnight crash, it is crucial to trade based on observed trends. The short-to-medium-term trend remains downward until we see a slowing of momentum, a bottoming pattern, or a break in structure.