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Bitcoin slides as Wall Street slumps

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@waraira777
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Cryptotrend

Bitcoin's (BTC) effort to break above $50,000 USD has taken a slight detour as the leading cryptocurrency fell below that level once again. Most altcoins have also stalled since yesterday's gains, and the market cap struggles to stay above $1.5 billion USD.

Bitcoin appears to be highly correlated with traditional markets, as major indices were also down substantially yesterday. The NASDAQ Composite Index is down 2.7%, the NASDAQ 100 is down 2.88, while the S&P 500 is down over 1%.

While yesterday's story was about cryptocurrencies deviating from the moves in tech stocks, today, the fall in growth assets has caught up with digital currencies.

Since BTC plummeted to $43,000 USD over the weekend, the leading cryptocurrency has been gradually rising in value. In recent days, bulls were especially active and pushed the asset north.

This led to yesterday's mostly positive trading day in which Bitcoin rose to almost $53,000 USD, a price that became the highest level in ten days.

However, the bears interfered at this point and drove the cryptocurrency south again. In the following hours, BTC dropped to $49,000 USD, and although it has recovered some ground since then, it still struggles to reach $50,000 USD.

This particular level remains BTC's first and foremost hurdle on its way north. If the asset manages to conquer it decisively, the next resistance lines are $52,000 USD, $53,150 USD and $54,000 USD.

Alternatively, technical indicators report that support levels that could contain a possible price drop are at $48,000 USD, $47,200 USD and $46,000 USD.

On the other hand, the alternative cryptocurrency market also enjoyed the last few days, with frequent double-digit gains. However, most of the alternatives have stalled or retreated on a 24-hour scale.

Ethereum jumped above $1,600 USD briefly, but a slight correction has reduced the second largest cryptocurrency to $1,560 USD. ADA (-3%), Binance Coin (-3%), Polkadot (-3%), Litecoin (-4%), Chainlink (-3%) and Bitcoin Cash (-3%) are all in the red.

The only exception among the top ten comes in the form of Ripple. XRP has added 2% of value since yesterday and trades above $0.45 USD.

Chiliz leads the field of gainers with a 55% increase to $0.11 USD after news broke that the blockchain project will expand its services to the US as well.

It is followed by Enjin Coin (50%), Hedera Hashgraph (24%), Decentraland (22%), Arweave (22%) and ZKSwap (20%).

Conversely, Curve DAO Token (-10%), Voyager Token (-10%), Fantom (-9%), Polygon (-8%), NEM (-8%) and Reserve Rights (-6%) have lost the most since yesterday.

The cryptocurrency market capitalization is down $60 billion USD from yesterday's high and is just north of $1.5 trillion USD.

In parallel the tech-focused Nasdaq was decimated yesterday as it continued its losing streak this week. Apple closed down 2.3%, Google down 2.5%, Amazon down 2.7%, Tesla down 4.7% and Paypal down 5.1%.

The problem? Those rates of return again. But this time they are joined by rising interest rates. This duo is putting pressure on growth stocks that now look increasingly overvalued as they soaked up investor cash during the pandemic.

With borrowing costs for businesses and consumers more likely to rise in 2021, the cheap cash that helped drive stock market performance over the past 12 months is causing headaches for balance sheets.

As those interest rates rise and the value of those growth stocks slide, it creates a crisis where borrowing costs erase gains, leading to this week's tech selloff.

According to Jason Ware, chief investment officer at Albion Financial Group: "As rates go up, as yields go up, what we continue to see is this push against owning growth companies and, in particular, large-cap tech. And I think early on that makes sense: you start to shake a little bit of complacency as yields rise, and portfolio managers, especially those who are more short-term oriented, start to rethink those positions."

However, it's not all bad. Banks, which were cowed for most of 2020 by fears that the billions in loans they had made to consumers and businesses would default, did not. As a result, big finance is now poised to step up, as increases in borrowing costs are good for the banking industry.

On top of that, financial institutions were effectively prohibited from paying dividends and engaging in share buybacks during the pandemic, meaning that these firms are awash in cash and likely to spend at the first opportunity.

These two elements are likely to have a significant impact on cryptocurrencies. The rising cost of borrowing means we are less likely to read headlines about companies like MicroStrategy selling debt to buy Bitcoin in bulk, as we have been.

Secondly, where is all this accumulated cash going to go? Will companies continue to diversify their portfolios as has been the trend over the last 12 months, with cryptocurrencies being one of the main beneficiaries, or will the uncertainty and risk factor associated with buying Bitcoin and others see cash return to traditional stocks stifling the crypto boom? Time will tell.

Posted Using LeoFinance Beta