In the last 48 hours we've seen another US$20 billion shaved off from total cryptocurrency market capitalization:
Total Cryptocurrency Market Cap
Today's total market cap of ~US$133 billion represents a US$46 billion decline from the peak reached on September 2nd at US$179 billion.
Judging by the chart of the preeminent cryptocurrency, Bitcoin, a crucial moment is close at hand:
Bitcoin/USD (Daily)
The shaded area above should offer major support in the event of further downside over the coming hours/days. However, in the event that Bitcoin drops below the $3,400 level we could see a major liquidation, as every Bitcoin holder who bought in the last month would be under water on their position. Below $3,400 the $2,800-$3,000 area would offer the next potential line of defense.
Ethereum/USD (Daily)
Ethereum has a similar area of potential support stretching from $215-$240, below that a test of the $150-$160 area is possible.
I view Bitcoin as a trading vehicle just like AAPL shares or copper futures. From a trading perspective some of the news that's hit the wires in the last week creates a unique dynamic; on the one hand we have BAML saying that Long Bitcoin is the most crowded trade on the planet, then on the other hand we have Jamie Dimon stating that "It's worse than tulip bulbs. It won't end well. Someone is going to get killed," - Excuse me? Someone's going to get killed? Lots of tulip bulb talk lately as well. We also have China allegedly shutting down its domestic virtual currency exchanges.
That's a load of bearish headlines in a short period of time. In fact, if someone needed a reason to unload their bitcoins and cryptocurrencies they now have all the reasons they would ever need (China crack down, CEO of one of world's largest banks calling Bitcoin a 'fraud' etc.).
However, from a contrarian perspective I must say that if the Bitcoin chart doesn't sustain too much damage (i.e. it doesn't have a weekly close below the ~$3,000 level) against this backdrop of bearish headlines, this could be the last time to jump aboard the train before the $10,000 level. Call me crazy but I understand market psychology very well, Bitcoin (and Ethereum) has (have) my full attention here.
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