In the last few months, the Bitcoin price took a good beating, bringing critics of cryptocurrencies out of the closet and scaring small investors. Given the current macroeconomic scenario, it’s expected that risky assets underperform, which we can see in indexes such as S&P500 and NASDAQ. Stocks from the technology sector plummeting, inflation reaching historic levels and rate hikes meeting after meeting.
Cryptocurrencies are considered even riskier than the tech sector, which justifies the higher volatility and drop seen so far.
Venture capital funds in crypto claiming insolvency definitely doesn’t help to drag attention to the market and aligned with a strong and rising US dollar, is a recipe for a risk-off approach for the participants.
The correlation between NASDAQ and Bitcoin remains strong, with Bitcoin always reacting more both to the upside and downside.
Participants start to wonder how much more can the FED remain with a hawkish posture, now that multiple economic metrics are back to pre pandemic levels.
A more dovish approach by the FED is certainly needed for the markets to shift bias, as participants need to believe it’s worth taking on more risk.
While there is no way to call a bottom, major markets definitely look beaten up.
Back in June the red ball occurred at $28404 for Bitcoin and the price dropped quite nicely, about 38% on its peak and now has been trading in a range.
Fat Pig Signals have been recommending a more conservative approach towards cryptocurrency since november 2021, pointing out the importance of capital preservation during this type of environment.
It’s important to be able to survive and catch potential upcoming opportunities in this market and that means not taking unnecessary risk when it’s not needed.
For those interested to know more about our “Balls” algorithm, please refer to our article where we dive a bit more on how it works.