Crypto Rout Continues as Bitcoin Futures Sank -10.3% Last Week

Cryptocurrency markets continued to face steep declines last week, with Bitcoin futures (/BTC) seeing a -10.3% weekly drop that briefly brought price below 81,000 and has now resulted in a roughly -33% plunge from its all-time highs of 127,250 on Oct. 6. 

Other notable crypto products like Ethereum, XRP, Solana, and Dogecoin suffered similar declines during the week, suggesting a broader unwind occurring in this fast-moving and volatile sector. The overall crypto space lost roughly $1.4 trillion in market cap since those highs and now sits around $2.87 trillion, according to coinmarketcap.com.

This most recent leg down for crypto coincides with slumping equity markets, as even a crushing beat on earnings and guidance from the mighty Nvidia (NVDA) on Wednesday was not enough to push stocks back into an uptrend amid worries about the red-hot artificial intelligence boom starting to cool. The S&P 500 (SPX) closed the week down -2%, marking a swift -4.6% downswing from its all-time highs of around 6,920 in only 18 trading days. Meanwhile, the tech-heavy Nasdaq 100 (NDX) fared even worse, as it saw weekly losses of -3.1% as well as a -7.4% overall drop from its own highs near 26,182.

The severity of this downward spike in cryptocurrency is noteworthy, firstly because it is the worst selloff since the 2022 “Crypto Winter” when a chain reaction of bankruptcies and corporate failures sparked by the collapse of the FTX exchange caused markets to implode. But an additional point to consider is that crypto typically is regarded as being a relatively higher-risk sector, which seems to be ringing alarm bells regarding a potential tone shift in investor sentiment to risk-off from risk-on. 

There is also a major potential catalyst on the horizon in the Federal Reserve’s Dec. 10 meeting, for which the chances of an interest rate cut have wildly fluctuated this week. Crypto and interest rates typically experience an inverse relationship, so a rate cut that makes fixed income less attractive could help breathe new life into the risk-on crypto space.

Stocks related to the crypto space also suffered recently. Strategy (MSTR) was one of the most notable movers, as it is heavily exposed to these adverse movements due to its massive bitcoin holdings that accounts to 649,870 tokens – roughly 3% of all Bitcoin. Strategy is now down -57% from its Jul. 31 earnings report.

Meanwhile, analyst reactions have thus far been muted for MSTR and other notable companies in the crypto space like Riot Platforms (RIOT), Marathon Digital Holdings (MARA), and TeraWulf (WULF). However, Goldman Sachs cut its price target on Coinbase (COIN) to $314 from $368 and kept its neutral rating on Friday. 

From a technical perspective, Bitcoin futures show a heavy concentration of trading activity near the 85,000 range according to the yearly Volume Profile study, so this could be an important area to watch whether the bulls can retake in the coming days. For momentum, the Relative Strength Index (RSI) crossed below the oversold area last week.

The move below this threshold of 30, coupled with downward trending price seeing progressively lower lows, typically is regarded as a sign of weakness. The yearly -3 Standard Deviation Channel currently comes in near 80,300, giving another potential downside area to consider for support.

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