The cryptocurrency markets are in the red today, with Bitcoin regressing from the USD 3,900 level to USD 3,780 as of this writing on the evening of 3 January 2019. In the 2 January market analysis, it was explained that USD 3,900 is a critical level since that is possibly the level where Bitcoin futures traders on the Chicago Mercantile Exchange (CME) took out short positions. It is an ominous sign that Bitcoin was not able to break through that level despite a crash on the stock market today, and possibly confirms that CME traders have collectively shorted Bitcoin from the USD 3,900 level.
The Dow Jones Industrial Average (DJIA) crashed 660 points today, and every major stock index on the planet is in the red. This was spurred by Apple announcing that iPhone sales in China are far below expectations. Further, global manufacturing saw its sharpest decline in December 2018 since the Great Recession. The USD weakened as well according to the dollar index. With both stocks and the USD declining, this creates a perfect storm for investors to seek safe-haven assets. Indeed, silver is approaching USD 16 and gold is nearing USD 1,300, after a long period of time during 2018 where silver and gold were at USD 15 and USD 1,200 respectively.
It is theorized that investors will take their money out of stocks and put them into Bitcoin during a stock crash as Bitcoin is independent of the stock market and can be considered a safe haven asset like gold. However, the tight grip of the CME Bitcoin futures on the price of Bitcoin may be overwhelming that effect. It has been observed that if CME Bitcoin futures traders take out shorts at the beginning of the month then Bitcoin generally declines all month, and gets beat back from increasing beyond the level where short positions were taken. That may be what is happening during these first days of January, strong upward pressure from a bad stock market may be getting suppressed by CME Bitcoin futures traders.
All things considered, Bitcoin may retest lows around USD 3,100 that were witnessed during mid-December, since apparently even on extremely bad stock market days Bitcoin cannot get past USD 3,900. If Bitcoin goes lower generally the other cryptocurrencies head downwards as well, and that is exactly what has happened today.
The total cryptocurrency market cap has declined from USD 133 billion to less than USD 131 billion. Ethereum, Ripple, Stellar, Litecoin, Monero, Dash and Bitcoin Cash are down 4%. Ethereum is still in 2nd place in terms of market cap, with a USD 900 million lead over Ripple. EOS is down a more severe 7%; it is common for EOS to decline more than other major cryptocurrencies on down days. Dogecoin is only down 1.3%, and it seems Dogecoin has been far more stable than other cryptocurrencies in recent months.
In summary, despite a bad stock market crash which should have led to upward pressure in the cryptocurrency markets, all major cryptocurrencies have seen significant declines on 3 January.
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