US futures are red, and so is Bitcoin today. This week hasn’t been good for the US equity market or Bitcoin. The crypto king has broken a major price support level today, and it is now trading at 38K. The pessimism continues to grow among investors and traders when it comes to riskier assets, and this is chiefly influencing the price of equities and Bitcoin.
One big question for investors and traders when it comes to Bitcoin is why the price is dropping so sharply and why there is no bull rally. The thing with Bitcoin is that when it begins to fall, the price action drops like there is no tomorrow. Particularly, January isn’t the best month for Bitcoin anyway as historically speaking; Bitcoin’s price tends to be much more volatile in January. Over the last ten years, we have seen minimal gains for the month of January.
The fact that the Bitcoin price continues to fall is based on a number of factors. Firstly, there is this general stance that central banks around the world, especially the Fed in the US, will bring inflation under control. Bitcoin is a hedge against inflation, and hence we are seeing the kind of price action that we see today. Secondly, countries like China and Russia aren’t supporting the adoption mechanism as well. For instance, recently, the Russian central bank issued a strong statement where it wants to ban the bitcoin mining operation. Thirdly, the adoption mechanism is still slow. It has been a while that we have heard news like Tesla and Bitcoin. When Elon Musk announced that consumers could buy Tesla with Bitcoin, it pushed the bitcoin price higher. Before that, we had news that Paypal started to accept Bitcoin. Those kinds of news waves were highly supportive of the Bitcoin price. Today, we are missing all that, and hence the Bitcoin price is falling to find love among traders.
Having said that, Bitcoin is still the currency of the future, and if one was ready to buy Bitcoin at 68K, then he or she must be excited to see a bargain like today. Smart money and other institutions are certainly going to take advantage of the current price action, and they are likely to bag some great bargain.
From the technical price perspective, the bitcoin price has violated the key support level of 40K, which was already tested a few times before. Now all eyes are on the next two important price levels: 35K and the most important one is 30K. It is highly likely that the bitcoin price will visit the 30K, but if it does will make the current sentiment even worse, but the smart money will know that it is a deal of their lifetime.
The dollar index continues to stay in an uptrend as traders are very much pricing in the possibility of an aggressive monetary policy from the Fed. The Fed chairman has said that they will bring inflation in control under all circumstances. The Fed has already reduced the asset purchase program and it wants to increase the interest rates three times this year.
The Asian stock market traded mostly lower on the final trading day of the week. The Nikkei index plunged 0.90%. The Shanghai index dropped by 1.01%, while the HSI index fell by 0.29%. The ASX index declined by 2.27%.
Dow Jones and S&P 500: Market Breadth
The Dow Jones’ market breadth lost more momentum during the last session. 67% of the Dow Jones stocks traded above their 200-day moving average.
The S&P 500 stock breadth also confirmed weakness un momentum. 64% of the shares traded above their 200-day moving average.
Dow Jones Futures Today
The Dow Jones futures are trading lower today. In terms of economic data, investors will be looking at the ECB President’s speech which is scheduled at 12:30 GMT. What thy will be looking during her speech is if she can continue to hold dovish monetary policy stance when all other major central banks are increasing interest rates. The ECB has said so far that it doesn’t think that it is the right time to increase the interest rate which many investors disagree. They believe that if the ECB misses this window, they will be left behind the curve which is going to cost the bank dearly.
The US 30, also known as the Dow Jones Industrial Average, is trading firmly in a downtrend on the daily time frame. The Dow violated below the 200-day simple moving average earlier this week which is a matter of concern as it shows weakness in the price action. Traders are keeping a close eye on December 1st’s low of 33, 928. As for the RSI, it has pulled away from the overbought area and now trending deep into the oversold territory. This means that a rebound in the price action can take place.