Market Mayhem: Cryptos, Stocks, Silver, and Oil Plummet as Gold Glows
Financial markets suffered a reversal of fortune on Thursday as Wednesday’s gains were erased in a brutal downturn for asset prices, with cryptos, stocks, silver, and oil recording steep losses. After a brief dip, gold recovered into the green.
The surge in selling pressure came Thursday afternoon as a sharp sell-off in chip stocks wreaked havoc on the major indices, while weaker-than-expected economic data amplified the downturn.
The latest weekly jobless claims number rose more than expected last week, suggesting that the labor market continues to cool. Data from the Department of Labor showed 249,000 initial jobless claims were filed in the week ending July 27, up from 235,000 the week prior and the highest level since August 2023.
Also exacerbating matters was the latest reading on activity in U.S. manufacturing, with the ISM’s manufacturing PMI coming in at 46.8 in July, down from June's reading of 48.5 and the lowest reading since November 2023.
These data points, combined with the sell-off in chip stocks like Nvidia, wiped out the boost in sentiment enjoyed after the Fed held interest rates steady on Wednesday and signaled the increased likelihood of a rate cut in September.
At the closing bell, the S&P, Dow, and Nasdaq all finished lower, down 1.37%, 1.21%, and 2.30%, respectively. The U.S. 10-year Treasury yield fell 12 basis points to 3.98%, the first time the 10-year yield has fallen below 4% since February, and the DXY gained 0.38% to trade at 104.351.
Data provided by TradingView shows that Bitcoin (BTC) lost support at $64,500 near midday and rapidly fell to a low of $62,227, recording an intraday decline of 4.17%.
Dip buyers have since stepped in, and at the time of writing, Bitcoin trades at $64,720, a decrease of 0.25% on the 24-hour chart, while gold trades at $2,491, an increase of 0.73% on the session.
Before Thursday’s downturn, analysts at Kraken noted the appearance of a bullish divergence on the Bitcoin chart, which suggested it could soon challenge its all-time high.
“BTC looks poised to test the previous all-time high (ATH) at $73,666,” the analysts said. “Although it briefly traded below the 200-day exponential moving average (EMA) and the $56,378 low in early July, there was no follow-through.”
“BTC managed to regain the 200-day EMA, creating a bullish divergence on the relative strength index (RSI),” they added. “Since then, BTC has reclaimed the 21-day and 50-day EMAs, indicating a clear bullish posture.”
It remains to be seen whether this analysis will hold up long-term as Thursday’s sell-off resulted in Bitcoin’s price falling back below the 50-day and 200-day EMAs, as shown in the first chart above.
Outlook improving despite sell-off
Despite Thursday’s sell-off, analysts across the industry agree that the outlook for the crypto market is improving amid calls for Bitcoin to be labeled a strategic reserve asset similar to gold.
“Gold and Bitcoin are both monetary assets with limited or finite supply,” said John Haar, Managing Director at Swan Bitcoin. “As such, they often respond similarly to broader macroeconomic events and trends.”
“Gold's current total market cap is estimated at approximately $13 trillion, while Bitcoin's current market cap is approximately $1.3 trillion (~10% the size of gold),” he noted. “Bitcoin can perform gold's role as store-of-value, with the added benefit that Bitcoin is well-suited for payments (also known as medium of exchange).”
“We see gold likely to appreciate gradually in the coming years as we continue to experience an environment where fiat currencies lose value/purchasing power over time, and foreign entities wish to move away from reliance on the US Dollar as much as they can,” Haar said. “We believe Bitcoin has a greater potential price appreciation than gold in the coming years. We expect to see parity between gold and Bitcoin market caps in the next 5-10 years.”
In the short term, Haar noted that “there could be factors at play which influence the price of gold or Bitcoin and cause them to behave differently.”
“For gold, we see gradual price appreciation being driven by central bank rate cuts, lower real interest rates, expectations for persistent inflation, and continued buying from foreign central banks and nations looking to gradually diversify away from USD-denominated reserve assets,” he said.
“Bitcoin, being a newer and smaller monetary asset, is prone to more price volatility,” Haar noted. “For example, in recent months we believe Bitcoin's sideways price action has been influenced by the following factors: long-term holders taking profits, Bitcoin miners selling after the halving in April, the German government selling Bitcoin, and the US government potentially selling Bitcoin.”
“Bitcoin is the premier asset to be owned if you believe we will see increasing levels of currency debasement, inflation, debt accumulation, financial censorship, or capital controls,” he concluded.
According to Taras Kulyk, co-founder and CEO of Synteq Digital, “Bitcoin has recently seen a massive uptick in appreciation.”
“The Fed stating that they're going to maintain existing interest rates according to what the market had anticipated is likely the reason that Bitcoin hasn't been able to cross the 70,000 mark,” he said. “Additionally, there's been a ton of selling from large-scale exchanges, including the Mt. Gox exchange sell, as well as the German government sell-down of their entire BTC stash.”
“Over the next few months as more and more financial institutions globally really start to adopt Bitcoin as a financial reserve asset, we should be able to see some additional and increased price appreciation,” Kulyk said.
As adoption rises, he suggested that “Bitcoin correlated with gold may come back to historic averages. However, the fact that Bitcoin is being viewed more on a digital basis versus a commodity, fixed price, non-fixed asset basis, it may not actually see correlations go back to where they were historically.”
“Ongoing political tensions globally will certainly increase the value of both over time,” Kulyk said. “However, as more and more investors are starting to appreciate Bitcoin's truly hard digital currency and wealth-maintaining status, we should see larger institutions coming in and increasing their balance sheet exposure to Bitcoin.”
Altcoin traders bruised and battered
Only a dozen tokens in the top 200 were able to rise above the noise to post gains on Thursday.
Convex Finance (CVX) was the biggest gainer, increasing by 9.3%, while Curve DAO Token (CRV) climbed 6.7%, and Helium (HNT) gained 5.7%. Mog Coin (MOG) was the biggest loser with a decline of 19.7%, followed by a 16.3% pullback for cat in a dogs world (MEW), and a loss of 15.13% for io.net (IO).
The overall cryptocurrency market cap now stands at $2.27 trillion, and Bitcoin’s dominance rate is 55.2%.
This article originally appeared on Kitco News.
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