Tighter monetary policies are weighing on speculative assets like crypto. Bitcoin crashed from $43,000 to $33,000 in four days and lost 23% of its value. On Jan. 28, the cryptocurrency was at $37,700, down nearly 50% from its all-time high, reached in November.
Has the plunge gone too far? Bitcoin’s relative strength index implies that the token is oversold, indicating it’s ripe for a bounce. Key support levels, such as its 200- and 50-day moving averages, have long been breached, indicating further downside ahead. Some analysts see a floor at $33,000, though $29,800 is also credible; Bitcoin fell that low in July, then rallied to nearly $70,000. “A lot of investors would back up the truck and open their checkbooks at prices around $29,000,” says Sean Farrell, head of digital asset strategy at Fundstrat Global.
Mike McGlone, senior commodity strategist at Bloomberg, says Bitcoin isn’t far from the 50% discount to its 200-day moving average that marked low points in 2018 and 2020. He notes that $30,000 is a “key support,” and that institutional holders have swooped in at that price. “I would see the tide rising at that level,” he says, expecting Bitcoin to eventually rally to $100,000.
Wilfred Daye, head of Securitize Capital, a digital-asset marketplace, also sees support at $30,000. But if Bitcoinfalls further, its next stop could be $27,000. That’s generally the breakeven price for Bitcoin miners, who receive new coins for processing transactions. What happens if Bitcoin drops that far? “That’s a very scary thought,” he says, since it could usher in another “crypto winter,” a long stretch of deeply depressed prices.
Last Week
Whiplashed
Stocks fell as the week began, but soared at lunchtime, with indexes posting gains at the close. But a rising VIX ruled the markets. Bitcoin fell beneath $33,000, then rallied. Eager dip buyers got crushed as stocks plunged, putting indexes in correction territory. Stocks rose as the Federal Reserve met, then sold off, then furiously rallied on Friday. On the week, the Dow industrials miraculously ended up 1.3%, to 34,725.47; the S&P 500 rose 0.8%, to 4431.85; and even the Nasdaq Composite eked out a gain—0.01%—to 13,770.57.
Fed Day
Fed Chairman Jerome Powell took a hawkish stance after the rate-setting meeting, saying that there was room to raise rates “without threatening labor markets” and that rates could rise at the March meeting. U.S. growth in 2021 came in at 5.7%, inflation at 5.8%.
The Earnings Parade
IBM posted its best sales growth in a decade on its cloud business, Boeing took a write-off but had its first positive cash flow since 2019, and General Electric had a decent quarter with some supply-chain bumps. Johnson & Johnson earnings rose on its Covid-19 vaccine, 3M on its N-95 masks, and American Express on upbeat revenue projections. Tesla had a record quarter, but warned of supply constraints. Apple just kept rolling despite chip issues.
Breyer Out, Battle Begins
Supreme Court Justice Stephen Breyer, 83, said he was retiring, ushering in another confirmation war. President Joe Biden said he would name the first Black woman to the court.
Girding for Russia
The United Kingdom claimed that Russia had tapped a pro-Russian Ukrainian to lead a puppet government, the U.S. placed 8,500 troops on “high alert,” and both countries told embassy families to exit. The U.S. and Europe talked sanctions, including kicking Russia out of Swift, the Society for Worldwide Interbank Financial Telecommunication. The U.S. asked Qatar, a major liquefied-natural-gas exporter, to help if Russia cut off European energy. By week’s end, Russia thawed slightly.
Annals of Deal Making
Nelson Peltz’s Trian Partners took a stake in Unilever, after its failed bid to buy GlaxoSmithKline ’s and Pfizer ’s consumer-health businesses. Unilever then announced that 1,500 managers would be cut and the company would be restructured into five units…Blackwells Capital took a stake in Peloton Interactive , and urged the ouster of CEO John Foley and a sale of the once-hot pandemic stock…Engine Capital supported a $9 billion Starboard Value bid to buy Kohl’s
…Bill Ackman’s Pershing Square bought a $1.1 billion stake in Netflix…The Wall Street Journal reported that Meta Platforms was winding down its Diem crypto project…Bloomberg reported that Nvidia was quietly preparing to drop its regulatory-challenged acquisition of SoftBank Group ’s Arm…Marcelo Claure, chief operating officer of SoftBank and formerly CEO of Sprint, quit the firm, reportedly in a dispute over pay.
Write to Daren Fonda at [email protected]
