Why increased Bitcoin volatility matters for other risk assets

In today’s note, I had intended to write about the release of Australian Capital Expenditure data tomorrow that provides an outlook of what firms plan to spend on buildings and equipment by industry. A rather dry subject, but topical in the current climate of booming commodities and how mining companies plan to respond to surging demand.

However something more interesting and potentially far more important has caught our attention, a two-day, 20% fall in the price of Bitcoin. Bitcoin's sharp decline comes just days after its market capitalisation surpassed $1 trillion and has sparked concerns that Bitcoin has further to fall after its strong run higher over the past four weeks.

Why movements in Bitcoin matters for other risk assets is because Bitcoin has become a bellwether for the bullish market sentiment and global liquidity that has coursed through markets in recent months. Furthermore, the price action in Bitcoin displays a positive correlation to other risk markets including specific “hyped” stocks such as Tesla, as viewed on the chart below.

As the outlook for Bitcoin is intertwined with the broader risk complex, it matters then where Bitcoin is heading. In our last article on Bitcoin in late January, when it was trading near $34,000, we opined here that Bitcoin had further to rally.

“Providing Bitcoin remains above the band of support ahead of $28,000 and then rallies above trendline resistance coming in currently near $36,000, the expectation is for a retest and break above the January $42,000 high, before $50,000.”

After reaching and exceeding the $50,000 price target, there is some risk that Bitcoin through an Elliott Wave lens has completed a 5 wave advance and a possible medium term high at last week’s $58,354 high.

Should Bitcoin post a daily close below the uptrend support near $47,000 coming from the January lows, it would increase the chances of a pullback towards $30,000. Aware that if Bitcoin can reclaim the uptrend support, as it's attempting to do now, allow for a retest and break of the $58,354 high. before a move towards $65,000.

Source Tradingview. The figures stated areas of the 24th of February 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

Latest market news

USD/CAD Defends Post-US Election Rally to Eye November High

Today 08:30 PM

Yen Strength Returns: USD/JPY, EUR/JPY Sell-Offs Gain Steam

Today 07:26 PM

Gold Goes for Recovery After Bitcoin, Trump-Fueled Pullbacks

Today 05:03 PM

AUD/USD Approaches November Low with Australia GDP on Tap

Today 04:15 PM

Forex Seasonality – December 2024: Can EUR/USD and AUD/USD Rally?

Today 04:11 PM

Crude oil forecast: Crucial week as OPEC meeting and key data loom

Today 03:45 PM

Open an account today

Experience award-winning platforms with fast and secure execution.

Open account

Web Trader platform

Our sophisticated web-based platform is packed with features.

Learn more

Latest Bitcoin USD articles

The stats are working against bitcoin bulls today

By:

Matt Simpson

November 29, 2024 01:11 AM

Bitcoin, Gold Analysis: Ceasefire, Holidays, and US Data

By:

Razan Hilal, CMT

November 27, 2024 10:20 AM

Trump Bump Price Action Setups: Gold, Bitcoin, EUR/USD, SPX

By:

James Stanley

November 26, 2024 06:30 PM

Market Wrap: Bitcoin Nears $100K, Gold and Crude Oil Stay Bullish

By:

David Scutt

November 21, 2024 10:29 PM

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.