Bitcoin: Has the bell rung on riskier assets?
Tony Sycamore January 29, 2021 12:15 PM
I suspect like many other seasoned traders, I have watched the drama in GameStop Corp (GME US) unfold with some disbelief as “Reddit Traders” made life very uncomfortable for hedge funds who held large short positions in the stock.
I am frequently asked by private traders in our City Index educational webinars if I believe bank and hedge fund traders target the stop loss orders of retail traders. My answer to this is always no. After the events this past week, I can no longer say that I have never seen the reverse occur.
A strong appetite for risk taking by traders during January has not been confined to stocks. It was preceded in early January by a brisk rally in cryptocurrencies, including Bitcoin.
To some, the current level of volatility across riskier assets are indicative of a level of speculation and leverage creeping into markets that was last seen prior to the start of the Global Financial Crisis, over a decade ago.
Promoting warnings that the January rallies in speculative assets will be left exposed and vulnerable in the months to come. A “ring the bell” type moment if you will.
While I don’t dispute an increased level of speculation has helped Bitcoin higher, the fundamental argument for holding cryptocurrencies to hedge against the debasement of fiat money remains compelling.
Additionally the technical set up in Bitcoin remains bullish. The impulsive rally to the January $42,000 high was followed by a pullback to towards wave equality support $28,800 that displays corrective or countertrend qualities.
Providing Bitcoin remains above the band of support ahead of $28,000 and then rallies above trendline resistance coming in currently near $36,000, the expectation is for a retest and break above the January $42,000 high, before $50,000.
Keeping in mind, should Bitcoin fail to break above $36,000 and then falls below support at $28,000, the risks are for a deeper pullback towards the December breakout level at $20,000.
Source Tradingview. The figures stated areas of the 29th of January 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.