The weekly US stock market trading session hasn’t even officially opened yet, but the bears are already holding the bulls’ feet to the fire in both the traditional and cryptocurrency markets, with Dow futures flashing a triple-digit decline and the bitcoin price slipping below support at $3,500.
Dow Takes Steep Losses as US-China Trade War, Government Shutdown Bite Back
As of 8:32 am ET on Monday, Dow Jones Industrial Average futures had declined by 193 points or 0.78 percent, implying an opening bell loss of 200 points. S&P 500 and Nasdaq futures were also in the red, with the other two major US stock market indices taking losses of 0.58 percent and 0.66 percent, respectively.
All three indices had posted significant gains on Friday, propelling the stock market to its fifth consecutive weekly gain following December’s monster sell-off. The Dow ended the day up 184 points, while the S&P 500 and Nasdaq plowed toward gains of around 1 percent, movements sparked by the surprise compromise that brought a temporary end to the 35-day partial US government shutdown.
Trump Flirts with Another(!) Government Shutdown
However, US President Donald Trump threw cold water on that rally on Sunday, telling the Wall Street Journal that a second shutdown is “certainly an option” if Congress fails to pass a spending bill that includes his desired $5.7 billion in border wall funding before the current continuing resolution expires on Feb. 15.
Trade War Roils Caterpillar Earnings
Also empowering the bears is a disastrous earnings report for Caterpillar, which on Monday announced quarterly earnings of just $2.55 versus the $2.99 that analysts had expected. Caterpillar shares plunged more than 6 percent in pre-market trading, intensifying the Dow’s decline since the industrial giant is considered a canary in the coal mine for the ongoing US-China trade war.
Bitcoin Price Careens Below Support at $3,500
The cryptocurrency market, though largely disinterested in the government shutdown, US-China trade war, and other geopolitical concerns, mimicked the carnage seen on Wall Street.
How Far Can Bitcoin Fall after Support Level Breach?
Relatively quiet in recent weeks, the bitcoin price dropped as much as 5 percent overnight to an intraday low around $3,350 and currently hovers at $3,415 on most cryptocurrency exchanges. The move was important since $3,500 had served as a support level for bitcoin. However, technical analysts differ on the significance of that support level breach.
Longtime bitcoin bear Mark Dow said that the cryptocurrency’s recent movements remind him of when its price held steady near $6,500 for several weeks before experiencing a sharp plunge. “Based on the pattern[,] odds are we get a similarly sharp drop again soon,” he wrote on Twitter, “may even have started tonight.”
#bitcoin has been dead quiet for several weeks around about 3,600. Last time bitcoin was quiet like this was when it was up at 6,500, it ended disastrously. Based on the pattern. odds are we get a similarly sharp drop again soon–may even have started tonight. $BTC $XBT
— Dow (@mark_dow) January 28, 2019
On the other hand, Mati Greenspan, a senior market analyst at eToro, argues that while $3,500 represents an interim support level, the bitcoin price has not broken out of the larger $3,000 – $5,000 range in which it has traded for the last several months.
“The cryptoasset movement today is nothing more than technical. There’s no need for overreaction here,” he said in market commentary shared with CCN. “Bitcoin is continuing to trade within the core area of support between $3,000 and $3,500, within the broader range of $3,000 – $5,000, where it’s been since November 2018.”
The market continues to adopt a wait-and-see mentality, while we await the next catalyst to send prices in a firm direction. Amidst a number of recent false-starts, it remains to be seen where this impetus will come from. Looking ahead, the continued development of the industry will surely throw up a new development soon.
Altcoins Bleed as Bitcoin Consolidates Market Share
As tends to be the case, the sell-off rocked the altcoin markets even harder than bitcoin. The ripple price (XRP) dropped 5.77 percent to $0.292, while the ethereum price crashed 8.51 percent to $105.
The bloodbath was so great that USD-pegged stablecoin tether (USDT), with a circulating market cap of $2 billion, now ranks as the fifth-largest cryptocurrency.
Slipping below tether was bitcoin cash, whose 9.55 percent haircut dropped its price to $111. Other major cryptocurrencies taking steep losses included tron (7.25 percent), stellar (10.76 percent), and bitcoin sv (9.08 percent).
As of the time of writing, the cryptocurrency market cap stood at $113.3 billion (or less, depending on how you calculate the circulating supply of XRP). At 53.6 percent, bitcoin’s market share currently sits at its highest mark since mid-December.
Featured Image from Shutterstock. Price Charts from TradingView.