Key Takeaways
Is one other crypto market wipeout possible?
With $1.1 trillion erased and macro volatility returning, the crypto market stays susceptible to cascading losses.
How are traders positioning?
Skinny bid assist and excessive leverage danger are tilting investor desire towards shares, whereas crypto struggles to discover a secure footing.
Is the crypto market gearing up for an additional October-style cascade?
From a capital-flow standpoint, that setup isn’t unrealistic. Over the previous 41 days, the crypto market has erased $1.1 trillion in complete market cap. And nonetheless, the market cap is 10% beneath the degrees seen throughout the October crash.
In brief, an actual market restoration hasn’t kicked in but.
In consequence, HODLers’ persistence is getting critically stress-tested.
And with macro volatility returning, situations are tightening quick. So is the market gearing up for an additional main wipeout earlier than an actual restoration begins?
Crypto market fragility reaches a breaking level
The market is so fragile that one bearish transfer may set off a cascade.
To start with, the TOTAL Crypto Market Cap has printed back-to-back pink candles, reflecting almost a 20% outflow over the past three days alone. In consequence, roughly $1.8 billion has been flushed out of the derivatives market.
Notably, 73% of those liquidations got here from lengthy positions, totaling $1.3 billion.
This, in flip, helps Tom Lee’s latest argument that leverage is eroding investor danger urge for food, maintaining any significant restoration on maintain.
Supply: CryptoQuant
Constructing on that, the info is in line with what’s taking place on-chain.
Bitcoin [BTC] reserves have began to rise once more, with holdings on CEXs climbing 0.63% over the previous three days to 2.395 million BTC. In sensible phrases, that’s 15k BTC flowing again, roughly $1.4 billion at present costs.
Put merely, the crypto market doesn’t have a powerful sufficient bid to soak up extra volatility.
So the true query is, what occurs now that the U.S. authorities’s reopening brings key financial information again into the combo?
A brand new week of macro strain begins, placing markets on alert
The week is filled with a heavy lineup of economic data.
Each September and October releases (together with the roles report) are lastly set to return out after the shutdown pushed them into backlog. However past the macro prints, there’s one other main catalyst on deck.
Nvidia [NVDA] is about to report earnings, with an implied move of +/- 7.5%, signaling a $345 billion swing in market cap. That’s an enormous quantity of capital with clear potential to affect flows into the crypto market.
Supply: TradingView (NVDA/USD)
Notably, this divergence is translating into value motion.
On a quarterly foundation, NVDA continues to be up 1.92%, whereas BTC is down 16.64%, marking its weakest This fall since 2019. Zooming in, NVDA closed its final trading day on the 14th of November up 1.77% vs. BTC’s 5.2% dip.
General, with volatility excessive, bid assist skinny, and leverage danger elevated, traders are favoring shares over crypto.
Towards this backdrop, as macro strain builds, one other crypto market cascade seems to be more and more possible.
