Equities and other risk assets have reached levels where they are relevant to the future direction of Bitcoin (BTC) and crypto as a whole.
Nasdaq 100 (QQQ) represents big U.S. technology stocks. QQQ has hit resistance at the 200-day moving average (Figure 1, black line). The fact that the 200-dma in QQQ is flat makes that resistance extremely powerful. That could imply the rally in stocks is flat-out over.
We also noticed that QQQ is near a high volume price at $169. If QQQ slips below that level, longs that were hopelessly trapped in December may sell with gusto. Shorts may also reassert if QQQ is below $169. Net-Net: The combination of very strong resistance right near a location where sellers could get trigger happy puts tech stocks and likely other risky instruments in danger of getting hammered.
Our concern in equities is amplified by what is happening in VIX. VIX is an index that measures fear in equities. At present, VIX is pressing resistance near 17.17 (Figure 2). A potential breakout in VIX matches up with charts suggesting a potential drop in QQQ.
We are also concerned that Overstock (OSTK). OSTK is the owner of the t-Zero platform, which represents the future of digital securities. At present, OSTK is failing right at the bottom of an expanding triangle formation (Figure 3). For the moment, that setup is bearish. Net-Net: “Crypto equities” don’t trade particularly well.
For Bitcoin (BTC), the question is simple. Can Bitcoin (BTC) hold up or rally if stocks get hit hard again? Crypto enthusiasts long for the day when legacy assets get hammered and Bitcoin (BTC) skyrockets. It’s the day people realize crypto is the only money with integrity.
While that sounds wonderful, if you followed that ideology in Q4 of last year, you are no longer a crypto enthusiast because you are no longer economically viable.
Bottom Line: Bitcoin (BTC) has to hold up if stocks fall. If Bitcoin (BTC) sat quietly, if stocks dropped sharply, that would be considered a huge victory for crypto. Right now, Bitcoin (BTC) has a potentially bullish set up as long as it is above $3,500. In reality, all markets including Bitcoin (BTC) may be affected by any potential sharp drop in U.S. stocks.
In times like these, the experience of the Crypto.IQ Trading Desk becomes even more invaluable. Their trading decisions help make our analysis better.
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