EQUOS — Morning Update — November 27th
While US markets paused during Thanksgiving, the rest of the world set up for a cautious end of the week. Progress in vaccine trials have enthused most investors but the real impact of coronavirus cases (still rising), along with uncertainty in regards to economic policies generated some risk-off moves.
Equities in Asia and Europe retreated slightly yesterday and are set to continue in early morning today. Following an OPEC meeting, oil retreated over 2%. Gold on the other hand stayed put, unable to move away from $1,810.
Traditional markets might have been muted but the crypto space was gripped by a significant bout of volatility. I wouldn’t say ‘massive’ by the way; for anybody who’s been in the space for a while the 14% intraday low we saw with BTC is not unexpected. Similarly the varying degrees of 20% retracement in alts is something we have to contend with when trading those more volatile assets.
The dynamic mentioned in earlier briefings of reduced miners sales still holds. So they’re not the source of the selling pressure.
A more likely explanation is the more obvious one. As we approached the 20K mark but failed to reach it, impatient (greedy and fearful?) traders took profits. We saw an increase in whale transfers to exchanges -typically hinting at large investors prepping to exchange their holdings into something else, typically fiat.
Couple that with the tweet by Brian Armstrong hinting at US regulators curbing down on private wallets -and striking at the heart of the privacy and decentralised values that are so dear to crypto holders, and you’re setting up for that kind of downturn.
Naturally, as mentioned in earlier updates, a big part of the past two-month rally was leveraged positions. Those are very supportive when everything goes well but, obviously, amplify moves negatively too, when things swing the other way. Yesterday saw about $1.3 Bn worth of liquidations across exchanges.
So what now? As a long-term holder I like to be somewhat contrarian and love buying opportunistically. The pullback was a godsend for many traders looking to allocate more capital or get in at a relatively better price. The pullback might endure, though, the red candle engulfs about 10 days of trading and probably shook the confidence of many.