First Mover Americas: Declining ‘Buy the Dip’ Mentions Signal Fading ‘Hopium’ in Bitcoin Market

Bitcoin was trading flat to negative even as the European stocks and the S&P 500 futures got a slight tailwind.Read MoreFeedzy

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Here’s what’s happening this morning:

Market Moves: Bitcoin, equities signal risk reset as West sanctions Russia for invading Ukraine.

Featured stories: Declining “Buy The Dip” mentions on social media suggest fading “hopium.”

And check out the CoinDesk TV show “First Mover,” hosted by Christine Lee, Emily Parker and Lawrence Lewitinn at 9:00 a.m. U.S. Eastern time. Today’s show will feature guests: Michael Sonnenshein, CEO, Grayscale Investments; Ben Schiller, managing editor, features, opinion and research at CoinDesk and Laura Shin, author of “The Cryptopians.” Grayscale is owned by Digital Currency Group, the parent company of CoinDesk.

By Omkar Godbole

Bitcoin and the U.S. stock futures trimmed early losses as the White House, European Union and the U.K. signaled economic sanctions on Russia in response to President Putin’s decision to send troops into eastern Ukraine and formally recognized two rebel-held regions in the country.

According to theFinancial Times, Boris Johnson, U.K. prime minister, said the “first barrage of economic sanctions” would be announced on Tuesday, warning that Putin was bent on a “full-scale invasion of Ukraine.”

While it is challenging to pin down the exact cause of the recovery in bitcoin and stock futures, the West’s decision to steer clear of military engagement and inflict economic damage via sanctions may have calmed fears of a full-scale war and put a floor under asset prices.

“This is a strategic defeat for Putin and a full-scale war is even less likely after today than before,” macro fund manager Igor Schatz tweeted.

The going action in the currency markets hints at a continued risk reset in crypto and stock markets during the American trading hours. The growth-sensitive Aussie dollar and Kiwi dollar were trading 0.5% and 0.64% higher against the safe-haven greenback as of writing and the AUD/JPY was up 0.74%.

Bitcoin was trading near $37,700 at press time, representing a 1.8% gain on the day, and the futures tied to the S&P 500 were down 0.3%. The cryptocurrency fell to a 20-day low of $36,250, and stock futures were down 1% during Asian trading hours on fears that a war would be impossible to avoid.

By Omkar Godbole

Data tracked by blockchain analytics platform Santiment shows “buy the dip” mentions on social media continue to decline in a sign of fading “hopium” – crypto slang for hopes of a quick recovery and a continued bull run.

Pullbacks typically end with crowd sentiment leaning cautious or bearish, as is the case now.

“The pattern that we have recognized is a 3 wave of Buy the Dip mentions during the downtrend each lower than the previous one and after 3 waves the bottom occurs before the market recovers,” Santiment’s market insights blog noted late Monday.

Buy The Dip mentions on social media and bitcoin’s price. (Chart by Sentiment)

Market moves could be violent as liquidity measured by average hourly bid-ask spreads is thinner than two months ago.

“Over the past two months, the bid-ask spread for Bitcoin and Ethereum USDT-denominated trading pairs on the biggest exchanges has widened and become more volatile than the previous few months,” Kaiko Research’s weekly newsletter said.

However, liquidity is much better than what it was during the January price slide.

Kaiko takes into account data from eight major exchanges, including Binance and Coinbase, to keep a tab on how liquidity is behaving market-wide.

The price recovery may receive a fillip from the derivatives market activity.

Data provided by Santiment show bitcoin’s perpetual futures market was aligned bearish early today, with funding rates, or cost of holding long positions, dipping into the negative territory.

So, a continued price recovery may force shorts to unwind their trades, leading to an exaggerated move to the higher side.

By Omkar Godbole

Meme token SHIB’s 50-day moving average (MA) crossed below its 200-day MA, confirming the first death cross, a technical pattern indicating potential for a major sell-off.

That said, the death cross is based on backward-looking moving averages and are unreliable as standalone indicators.

DISCLOSURE

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