Bitcoin (BTC) fell 6% on Tuesday, approaching support levels, or the price level below which an asset does not fall for a while, at around $20,500. The drop sent the price of BTC about 36% below its 200-day moving average of $32,000.
Bitcoin’s fall is accompanied by a drop in its Relative Strength Index (RSI) to 41. The RSI is an indicator that measures the speed and magnitude of price movements. Often used as a proxy for momentum (especially when the asset is trending), levels of 70 and above are often interpreted as a sign that an asset (in this case, BTC) is overbought. Levels of 30 or less often indicate that an asset is oversold.
This article originally appeared in Market Wrap, CoinDesk’s daily newsletter that dives into what’s been happening in today’s crypto markets. Sign up to receive it in your inbox every day.
In traditional stock markets, the S&P 500 fell 0.7% and the Nasdaq fell 1.9%. BTC’s correlation coefficients with the S&P 500 and Nasdaq are currently 0.73 and 0.78 respectively. As a reminder, correlation coefficients range between 0 and 1.0, with higher values indicating a stronger relationship between the assets.
The price of Ether (ETH) fell 11% in Tuesday trading. Its correlation coefficient levels against the S&P 500 and Nasdaq are currently 0.70 and 0.71.
Altcoins also traded in negative territory on Tuesday, with Polygon’s MATIC and Chainlink’s LINK down 11% and 9%, respectively.
●Bitcoin (BTC): $20,921 -5.5%.
●S&P 500 daily close: 3,921.05 -1.2%
●Gold: $1,716 per troy ounce -0.2%.
●Daily closed ten-year Treasury yield: 2.79% -0.03.
The prices for bitcoin, ether and gold are taken around 16 New York time. Bitcoin is CoinDesk’s Bitcoin Price Index (XBX); Ether is CoinDesk’s Ether Price Index (ETX); gold is the COMEX spot price. Information about CoinDesk indices is available at coindesk.com/indices.
Cryptocurrency markets appear to be in risk-off mode to start the week
Bitcoin was weak again in Tuesday’s trading as its price fell another 6% after Monday’s 5.7% drop, amid investors’ return to more risk-averse strategies. This may interest you: Binance and Cardano Founders Reach Out to Ukraine, Bitcoin Donations Increase.
From a technical standpoint, BTC broke below the 10-period and 20-period exponential moving averages (EMAs). In addition, the 10-period exponential moving average has started to move below the 20-period exponential moving average, which traders can see as a short-term bearish trend. Bitcoin price is challenging the $20,500 support level as suggested by Monday’s Market Wrap. Intraday volume is approaching average levels over the past 20 trading days, adding credibility to the strength of the move.
RSI levels fell to 41, which most investors are likely to interpret as neutral as it sits midway between the 70 and 30 overbought and oversold benchmarks. While no technical indicator should be considered purely predictive, it is interesting to look at BTC’s recent history when RSI levels approached 70.
So far in 2022, BTC’s RSI levels have approached or exceeded 70 on three occasions, on February 7, March 27, and July 19 (70, 75.34, and 69.01, respectively). Looking at BTC prices 30 days after the first two occasions, we see declines of 13% and 16%, with the RSI falling to 40.52 and 41.78.
Currently, BTC is 11% below the July 19 level, while the RSI has fallen to 41. A repeat of recent price behavior would mean that BTC could trade in a relatively flat range for the year. three weeks.
One thing to look at when it comes to on-chain data is the bitcoin put/call ratio between exchanges. For clarity, this metric divides the volume of put options purchased by the volume of call options purchased within the last 24 hours.
The buyer of a put buys the right to sell at a certain price, while the buyer of a call buys the right to buy at a certain price. The ratio of put and call options can be used as an indication of trader sentiment.
As more and more traders seek protection against potential price declines, the put/call ratio is likely to increase. The reverse is the case when traders want to take advantage of expected price increases (ie the put/call ratio decreases).
Recent increases in the put/call ratio mean traders are buying downside protection to hedge against further price declines. Furthermore, the motivation for this move is, at least in part, to reduce exposure ahead of Wednesday’s Federal Open Market Committee meeting, where an interest rate announcement is expected, and Thursday’s release of US gross domestic product (GDP) data.
Tether finds stable parity with the dollar: The issuer’s stablecoin USDT has found stability for the first time in more than two months since Terra’s collapse. If USDT passed the market resistance test with a return to normal, concerns about its reserves will continue, according to a trader. More information here.
Ether’s chart outlook darkens with price decline: The price of Ether (ETH) recently fell below $1,400, extending Monday’s 10% drop, its biggest one-day percentage drop in more than a month. An expected rise in interest rates seems to overshadow Ether’s optimism. More information here.
Biggie Smalls’ Estate Goes Crypto: Non-Fungible Token Market (NFT) OneOf launches its first collaboration with the rap legend’s estate, titled ‘Sky’s the Limit’. This collaboration allows NFT holders to vote to license one of the late rapper’s famous freestyles.
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