- $SUSHI Sell Off Pushes Crypto Market Down: Bitcoin Under $10K.
- Outlook for the US Dollar: DXY Retains Main Support as Bear Flag appears.
- Buffet dumps Wells Fargo Bank stocks, could point to a bullish signal for Gold and Bitcoin.
In today’s edition of Overbit Insights, we jump right into the story that is dominating cryptocurrency markets and headlines alike. SushiSwap, one of the largest new DeFi projects, has been the latest victim of what market participants like to call an “exit scam”.
What really happened is the lead developer of Sushiswap sold all his SUSHI tokens, something he confirmed and defended in his own Twitter account. This sale caused a massive drop upwards of 50% in the SUSHI token’s price. The rest of the market seemed to feel the pressure as well, as the total market capitalization of the cryptocurrency fell nearly $11 billion on Saturday morning.
On his Twitter account, the lead developer defended himself by, in so many words, stating that he did so in order to focus on development and not worry about the token price. As one can imagine in a space as vigilant as cryptocurrency, the community was completely beside themselves. Token-holders were outraged at the fact the lead developer believed he deserved a multi-million dollar payout after only a week of work.
As all markets do, it seems clear this sell-off has found its underlying narrative. Whether or not the SUSHI sell-off caused a market drop is a non-factor. It could be that the liquidity drying up caused a sell-off across all DeFi projects. Or it could be that investors simply derisked after a multi-month runup as we had. What’s essential to take away from this story is the continued and even growing volatility of cryptocurrency is a massive force to be reckoned with - and not one to take lightly.
Moving onto traditional markets, we take a look at the US Dollar, which is tracked by the DXY index. Judging by the chart, it seems DXY is holding onto a major support around the 92.00 region with a slight uptrend. However, in doing so, the DXY is also forming a textbook bear pennant which could signal further downside.
On a macro level, some analysts are high on the idea of further downside. According to FXStreet, the recent surge of DXY is nothing more than a counter-trend pullback. Based on their model, USD has been in a cyclical state for the past 34 years, with rotations every 16 years. These rotations are centred around major bottoms for the DXY, with one set in September 1992 at 78.19, and the next being set in March 2008 at 70.70. After bottoming out, the US dollar outperforms its competitors for the first 8 years, and then usually has a sluggish second half. Using this cycle as a reference, it seems the US Dollar is on the back half of this cycle, which suggests underperformance by the world’s reserve currency. This is only one analysis, and many others suggest otherwise. The weekly timeframe appears much more promising for a USD rebound, as the RSI swerves from oversold territory with price bouncing off the major support.
Closing out with one of the famed investors of all time, Warren Buffet. Tracking his investment portfolio over the decade, Buffet has historically been anti-tech, and extremely anti-bitcoin. Buffet’s portfolios have typically consisted of Insurance and Bank Stocks, and the recent action of Berkshire Hathaway cutting their position in the major Bank Wells Fargo could signal bearish momentum for the banking industry in the US. Wells Fargo, in particular, had its first loss since the 2008 housing crisis, posting a $2.4b loss in July.
This could all lead to bullish scenarios for both BTC/USD and XAU/USD if both the USD and the US Bank stocks are in bearish trends, but seeing what happened this week in the massive crypto sell-off, nothing is a guarantee in markets, especially ones as volatile as cryptocurrency. All this economic uncertainty could continue to lend credence to Gold as THE safe-haven asset in economic disasters, but how long this COVID-19 uncertainty lasts is hard to say. In the meantime, you can participate in the markets at Overbit.com, where we offer trading pairs of crypto, precious metal, and forex.
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