(Kitco News) – The Bitcoin price fell as much as 11% since Friday to below the $43,000 level though it is currently off those lows.
While a double-digit percentage move in either direction is not uncommon for the leading cryptocurrency, Bitcoin is not acting like the store-of-value asset that it is designed to be. The stock market is in free-fall, and fear has also gripped cryptocurrency investors. Meanwhile, the gold price is up fractionally on the day as investors flock to the precious metal instead.
Investors are seemingly fleeing risk altogether to start the week in response to China real estate developer Evergrande’s debt woes, which they fear could have a contagion effect on the economy.
Will Meade, a former hedge fund manager who now manages his own money, told Kitco that the Bitcoin price could have further to fall, saying:
“Bitcoin technically looks weak here as it’s forming a bearish head and shoulders pattern, which could take it back to $30,000. Hedge funds are completely de-risking here because of the potential spillover from Evergrande, including selling Bitcoin. Therefore…Bitcoin needs to prove it is not correlated to equities, and today’s results are not helping this theory.”
Meade recently tweeted that if Bitcoin could manage to “diverge from stocks,” it would be the “Holy Grail” for institutional investors.
IMO this is a big test for #Bitcoin here
if bitcoin can diverge from stocks (i.e go up while stocks go down) every hedge fund, mutual fund and bank will load the boat
and #Bitcoin will go to $100,000
because non correlation is the holy grail on wall street.— Will Meade (@realwillmeade) September 14, 2021
He went on to tell Kitco that the Bitcoin price and stocks alike are in for a bumpy ride:
“I think Bitcoin will continue to stay weak for the next few days, with the first support level coming at $38,000. Right now, it feels like hedge funds and institutions are selling all risk assets to raise cash, as this looks like the first real correction in stocks since the March 2020. This means a 10-15% pullback in the major indices. Historically Sept. 17-Oct. 1 is one of the worst seasonal periods for the stock market all year.”
It’s the narrative, stupid
Meltem Demirors, chief strategy officer of CoinShares, called the Evergrande mess “mainstream financial crisis porn,” saying that nobody cared about it until the latest dire headlines even though the situation has been unfolding for months. She has been inundated with questions from what she described as a hive-minded cryptocurrency community about Evergrande. Demirors blamed it on “narrative cycles,” reminding her Twitter followers that just a week ago, cryptocurrency investors were worried about stablecoin Tether.
evergrande situation is msm financial crisis porn – literally no one GAF until msm started writing alarmist headlines but it’s been going on for months?
amazing how hive mind CT is – my DMs suddenly full of evergrande concerns. last week it was tether FUD.
narrative cycles ♻️
— Meltem Demir◎rs (@Melt_Dem) September 20, 2021
Bitcoin is a volatile asset, and therefore market leaders are not spooked by the latest downturn. In fact, many of them, including Zac Prince, CEO of BlockFi, a wealth management platform for crypto investors, are buying the dip.
Thanks Evergrande for this beautiful opportunity to buy cheap #btc pic.twitter.com/FW4leOtVFE
— Zac Prince (@BlockFiZac) September 20, 2021
Alex Kruger, an economist and trader, explained that even Bitcoin is not immune to systemic risk, which “hits everything.” Kruger suggested in a tweet that now is a good time for investors to “rebalance portfolios and rotate from dogs to outperformers.”
Market crashes often are a great time to rebalance portfolios and rotate from dogs to outperformers, as systemic risk hits everything.
— Alex Krüger (@krugermacro) September 20, 2021
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