First Mover Asia: Bitcoin, Ether regain ground Sunday after early weekend battering

But investors are still unclear whether crypto will continue to follow trends in equity markets or is an uncorrelated asset.

Good morning. Here’s what’s happening:

Market moves: Bitcoin was trading at over $36,000 on Sunday after continuing its recent decline earlier in the weekend.

Technician's take: BTC is stabilizing on intraday charts, although $30,000 is a more significant level to watch given the decline in long-term momentum.

Prices

Bitcoin (BTC): $36,202 +3.4%

Ether (ETH): $2,532 +5.4%

Top gainers

Top losers

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.

Markets

S&P 500: 4,397 -1.8%.

DJIA: 34,265 -1.3%.

Nasdaq: 13,768 -2.7%.

Gold: 1,834 -0.2%.

Market moves

Bitcoin capped a forgettable three days, dipping below $34,400 at the start of the weekend, before mounting a small comeback on Sunday.

At the time of publication, the world's largest cryptocurrency by market capitalization was trading well above $36,000, a nearly 3.4% gain over the previous 24 hours but well off its all-time high near $69,000 set in early November. Trading volume was light with many investors continuing to assess troubling economic conditions and a pronounced decline in equities markets.

The tech-heavy Nasdaq fell 2.7% on Friday as investors continued to veer away from stocks that led recent years' charge in stocks. Two other major indexes, the Dow Jones Industrial Average and S&P 500 fell 1.3% and 1.8%, respectively. The market slump has stemmed from widespread concerns about interest rates, supply chain inefficiency and the ongoing coronavirus, which has been gathering strength in many parts of the U.S. even as it wanes in others.

Ether dipped below $2,400 on Saturday before returning to a base camp above that level, where spent the remainder of the weekend. At the time of publication, the second largest crypto by market cap was trading above $2,500, an almost 5.5% rise. Most of the major altcoins spent Sunday in the red.

"The market is holding its breath as investors look to the opening of the Asian markets for a sign of what equities will do this week," Joe DiPasquale, the CEO of crypto fund BitBull Capital told CoinDesk. "If Asian markets open strong, we can expect demand for crypto to go up, and even more so if the U.S. markets have a strong Monday.

DiPasquale added that "crypto is still finding its way as to whether it is a digital gold-like hedge that moves inversely with equities, or whether it's a risk-on asset that will fail if equities continue to fail on Monday as many equity indexes did on Friday. While those most bullish on the investment case for crypto cite longer-term data that point to Bitcoin not being correlated with other asset classes, data over the last two years has shown a correlation in the price of Bitcoin and equities."

Technician's take

Bitcoin (BTC) failed to hold short-term support at $40,000 as sellers maintained the two-month long downtrend.

Intraday oversold signals were not enough to sustain bids, which means longer-term indicators are more reliable to determine bitcoin’s price direction.

BTC was trading around $36,200 at press time and is down 17% over the past week.

The slowdown in upside momentum on monthly and weekly charts has been a persistent theme since December. As the long-term uptrend weakens, sellers typically outweigh buyers despite occasional oversold signals.

Further, when drawdowns (percent decline from peak to trough) become severe, short-term traders tend to reduce their position sizes and tighten trade parameters around intraday support and resistance zones.

Bitcoin is roughly 40% below its all-time high of $69,000, which is a significant drawdown. The previous drawdown extreme was in July when BTC settled near $28,000 after falling roughly 50% from its peak.

For now, initial support is around $35,000-$37,000, which could stabilize the current sell-off. The relative strength index (RSI) on the daily chart is the most oversold since May 19, which preceded two months of sideways trading before a rebound occurred.

If selling pressure accelerates this week, BTC could find stronger support around $30,000.

Important events

8:30 a.m. SGT/HKT (12:30 a.m. UTC): Jibun Bank manufacturing purchasing managers index (PMI) (Jan. preliminary).

5 p.m. SGT/HKT (9 a.m. UTC): Euro Zone Markit Manufacturing PMI (Jan. preliminary).

10:45 p.m. SGT/HKT (2:45 p.m. UTC): U.S. Markit Manufacturing PMI (Jan. preliminary).

11:30 p.m. SGT/HKT (3:30 p.m. UTC): Dallas Fed manufacturing index (Jan.).