3 Stocks to Sell if You're Bearish on Crypto

The largest cryptocurrency, Bitcoin, topped the $20,000 barrier on Friday on optimistic market sentiments about a possible drop in inflation numbers. The second largest crypto, Ether, also rose on Friday.

However, additional interest rate hikes will likely constrict the economy, which is expected to create pressure on the relatively riskier crypto market. Experts believe cryptocurrencies will continue a downtrend amid the volatile economic backdrop.

Moreover, digital currencies might face heightened regulations in the future. Gary Gensler, the current SEC chair, stated that the Commodity Futures Trading Commission (CFTC) needs greater authority to oversee and regulate crypto non-security tokens and related intermediaries.

Moreover, with the much-anticipated Ether merge expected to occur soon, the crypto market might experience more volatility. Hence, the blockchain stocks Block, Inc. (SQ), Coinbase Global, Inc. (COIN), and Riot Blockchain, Inc. (RIOT) might be best avoided now.

Block, Inc. (SQ)

SQ engages in the creation of tools that enable sellers to accept card payments and provides reporting and analytics and next-day settlement. The company also provides hardware products.

On July 13, SQ subsidiary Afterpay and beauty retailer Sephora announced their partnership to enable customers to pay for U.S. beauty brands and products in four installments. However, the gains from this partnership might be stretched over a long period of time.

For the fiscal second quarter that ended June 30, SQ’s total net revenue decreased 5.9% year-over-year to $4.40 billion. Adjusted net income decreased 56.8% from the prior-year quarter to $110.74 million. Adjusted net income per share declined 63.3% from the same period the prior year to $0.18.

The consensus revenue estimate of $17.60 billion for the fiscal year 2022 indicates a 0.3% year-over-year decrease.

The stock has declined 70% over the past year and 54% year-to-date to close its last trading stock at $74.29. Continue reading "3 Stocks to Sell if You're Bearish on Crypto"

Crypto Update: It Ain't Over Yet

It was a close call this May with a doom-saying title “Crypto Apocalypse?” where I shared with you an annihilating model for Ethereum and a bearish chart of Bitcoin.

Let us see what happened in the crypto market since then in the chart below.

Crypto Total Market Cap

Source: TradingView

Total crypto market cap had skyrocketed to the maximum of just over $3 trillion last November. Since then, almost ¾ of the total market cap has evaporated on the crypto crash down to $762 billion this June. That hurts!

More than $2 trillion of wealth was destroyed during that collapse. Some people were calling it a “crypto-winter” of the market. All of us have probably noticed that less videos and posts with clickbait titles on “how to become a crypto-millionaire” or new rising stars in the crypto-market have been popping up on social media lately.

In the next market share chart, let's check the status quo of the market leaders.

BTC ETH Dominance

Source: TradingView

During the collapse of the market, the main coin (orange) has managed to increase its market share tremendously from 40% up to 48% on the peak in June. How could that happen as it was bleeding alongside the whole market? The speed of the drop is the main reason. Continue reading "Crypto Update: It Ain't Over Yet"

Here's What's Next for BTC and Stocks

There’s no doubt about it: Bitcoin (BTC) has broken down. In fact, it recently sliced through significant support at the $28K level like a hot knife through butter. Take a look...

BTC Daily Chart

Source

As you can see from this daily chart of BTC, the dominant crypto dropped below resistance that had been firmly established back in 2021. I recently wrote about this level being a crucial line in the sand for BTC. And unfortunately, it failed to hold up.

So, where do go from here? If you look at the left side of the above chart, it’s clear that the best case for BTC support now sits somewhere in the range of $6K to $12K. And from its current level, it’s pretty much a straight shot to that range.

In addition, BTC spent quite a bit of time meandering in that range during 2020. I wouldn’t be surprised that, if we get that low, you’ll see similar sideways action.

And it’s not just BTC that’s gotten hammered. In fact, the entire cryptocurrency space now stands at somewhere around $1 trillion in market cap. That’s a far cry from the $3 trillion it enjoyed late last year.

Ouch.

But before you sound the death knell of crypto, remember that it’s not the only asset that’s been taken out back recently. In fact, I could just as easily put a chart up there of the Dow, the S&P, the Nasdaq, and the Russel 2000 and you would be reading much the same story, albeit not as dramatically.

Fear is Driving Selling

As I’ve been saying for months, investors are looking at crypto just like they do every other risky asset... they are selling. And they’re selling pretty much regardless of what’s happening to the asset’s underlying fundamentals.

Why all the selling? Pretty simple: The markets are oozing with fear right now. And when fear takes over, lots of assets get thrown out, no matter how good their underlying fundamentals may actually be.

That’s sad, but it’s true.

So, what’s driving all the fear? Take your pick. Inflation, global supply chain issues, the war in Ukraine, geopolitical uncertainty, higher interest rates.

And the rub of it is that all of these are playing a significant role in amping up the fear in the marketplace. If it was just one, it wouldn’t be so bad. But it’s not - it’s all of them.

The war in Ukraine is contributing to inflation of energy and food prices. Supply chain issues are contributing to higher prices and operational uncertainty. Meanwhile, inflation is making everything more expensive.

But it’s the last fear driver that I mentioned - higher interest rates - that really has everyone on edge. And while we all agree that those higher interest rates are the medicine to fight inflation, no one knows for sure how high they must go to get results. So far, inflation continues to roar higher despite higher interest rates.

Maybe we can take some solace in the fact that the Fed will likely continue to raise rates until the inflation numbers are headed in the right direction. Chairman Powell’s said as much to Congress just last week. And I don’t have much doubt about his - or the Fed’s - resolve to bring inflation down.

But until we begin to see inflation numbers drop, it’s a done deal that you’ll see more of the fear-based volatility and chop that you’ve seen for stock, tech, and crypto since the beginning of the year.

Sure, you’ll likely see some up weeks in the meantime. And there’s little doubt that an outlier or two in these asset classes are likely to thrive. But overall, until inflation gets under control, the outlook for crypto, stocks, and tech is lousy.

We Shouldn’t Be Surprised

The fact is we shouldn’t be surprised by what’s happening in all these risky asset classes. There’s had been gobs of money sloshing around the economy for years. And that low-priced capital has made just about everyone go out and buy a ton of stuff.

In my book, that’s been a good thing. It’s helped people and business weather a massive pandemic, driven innovation, and provided much-needed jobs for millions.

But one of the side effects of that cheap money has been inflation levels, unlike anything we’ve seen in decades. Certainly, because of all that cheap money, I figured we might see an uptick in inflation. But I had no idea it would come at us in such magnitude. Nobody did.

And when it comes to crypto, we shouldn’t be surprised that it’s been beaten up even more than its peers. While risk has had a hand in that, the fact that crypto is still a nascent and largely unproved asset class and marketplace make it worse. It’s simply going to get beat up worse when investors lose their appetite for risk.

So, what to do? As I mentioned, I think we’re going to see a moderation in inflation down the road. And when that happens the markets - including crypto - will start to recover. When that happens - and let’s say we get a handful of decent inflation reports - I would begin heeding my golden rule: Buy companies that know what they’re doing in markets with strong upside. And don’t sweat the small stuff. Take a long-term view. And don’t devote any more than 1% to 2% of your portfolio to all your crypto holdings, including BTC.

Stay safe,
Wayne Burritt
INO.com Contributor

Disclosure: This contributor may own cryptocurrencies, stocks, or other assets mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

Stocks And Bitcoin Holding Up

In last week’s installment, I told you about how we finally got a solid weekly up bar across every major stock index. In fact, I went into detail about the 6% plus bullish action for the Dow, the S&P 500, the Nasdaq, and even the broad market Russell 2000.

In addition, across the board, they all reversed multi-week down bars. And the Dow’s reversal was the most longed-for of all four indexes: It snapped an eight-week collection of weekly down bars.

All in all, the action was a welcome sigh of relief. So, what happened after that? Did we get much follow-through last week?

While we didn’t get another weekly up bar in all four indexes, all four did manage to book higher lows than the prior week.

Is that a good thing? You bet. It means that despite selling, prices held up. It also means that sellers didn’t have to resort to continually lower lows to attract buyers: Buyers were finally willing to pay up for shares. And I don’t have to tell you that change in sentiment was a huge improvement over the constant bearish price action over the last two months.

Are we out of the woods yet? Not by a long shot. In fact, as I mentioned last week, the recent positive action in all four stock markets could just be a temporary bull market rally.

It might also develop into what’s called a “dead cat bounce.” Here’s what I mean: Continue reading "Stocks And Bitcoin Holding Up"

Crypto Apocalypse?

Ethereum (ETHUSDBIT) has an annihilation pattern in its chart and I would like to share it with you below as the price of the second largest crypto is approaching the trigger point.

Crypto - Ethereum Chart

You know this famous pattern very well as this model frequently appears in different instruments. I know it looks a little bit weird as the shoulders are not symmetric. However, all parts are in place, and the Head is the highest peak.

The failure to proceed to the upside after breakout beyond this February’s peak of $3,280 dried the demand for the second largest cryptocurrency; it has been building the small Right Shoulder of the pattern. The Neckline has been drawn through the valleys of the Head. Continue reading "Crypto Apocalypse?"