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Much Debate

Mati Greenspan, eToro Analysis

There’s been much debate lately about what effect of a stock sell-off might have on the crypto market. Well, today we’re a little bit smarter.

The stocks and bonds are right in the middle of a vicious sell-off and prices suggest that it has spilled over into the crypto market.

Here we can see the Nasdaq 100 in blue and bitcoin in orange. Stocks, especially in the tech sector have been having a very red October and yesterday afternoon cryptos followed suit.

032083281212As we’ve been saying, cryptoassets are classed as high risk. In the traditional markets, stocks are considered high-risk. So when a sell-off happens in the tech sector, even the biggest crypto enthusiasts take note.

This is why it pays to keep a diversified portfolio which is more than just cryptos and tech stocks. Gold, for example, did very well yesterday. As a safe haven asset, it tends to trade opposite the stocks and that’s exactly what happened here.

Please note that there will be no daily update tomorrow as I’ll be travelling. We’ll resume on Monday the October 15th.

Today’s Highlights

The Sell-off

Over the weekend

The Crypto Debate

Please note: All data, figures & graphs are valid as of October 11th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

Quite a dramatic headline landed in my inbox this morning from the Financial Times.

0230810083220(Please note that the Financial Times is a paid subscription magazine. We do have free subscriptions for our high equity clients, feel free to discuss with your account manager.)

At this point, the S&P500 has lost almost all of the gains it has accumulated this year.

801303290902The question of course now becomes, where do we go from here?

Is it time to buy the dip or will the sell off continue?

Well, the answer is less important than your portfolio makeup. If you’re heavily invested in the tech stocks, it might be a good chance anyway to limit exposure and diversify into other assets.

If you’re looking to gain more exposure to stocks, perhaps be selective in the stocks you choose and consider using a stop loss.

For the day traders out there who like a bit of risk and volatility, now is a great time to make a few trades.

Upcoming News

Today we’ll get some critical data from the USA that could impact the markets a fair bit. The monthly CPI inflation data to be released an hour before the opening bell will be watched not only by traders and analysts but by the Federal Reserve.

Despite the fact that Donald Trump thinks the Fed has “gone crazy” by raising interest rates, if the inflation data starts showing signs of an increase, they may have no choice.

Over in Europe, we’ve got two things to watch out over the weekend…

1. Monday is the deadline for Italy to propose their budget to the European Union. We’ve discussed this several times and let’s hope for the best.

2. Elections in Bavaria might not normally be very interesting but the polls here indicate that the results may have a wider impact on the Euro.

This graph (from the print edition of the Financial Times) shows just how much support Merkel’s allies, the CSU, have lost lately.

9023902301221Certainly if these polls these polls are reflected in the final results , it will be bad news for the Prime Minister and will weaken her coalition. Given the broader market sell-off, the thing we really need to look out for is uncertainty.

Crypto Debate

A great debate is currently playing out on Twitter over the future of cryptoassets. The heavy hitters involved are none other than Dr. Doom, the man who is widely credited for predicting the 2008 financial crisis, Nouriel Roubini and the creator of the Ethereum network Vitalik Buterin.

Roubini has recently given a controversial testimony lashing out at the entire crypto industry. In one tweet he even called Bitcoin worse than North Korea.

Dr. Roubini has also been lashing out at Vitalik himself over the last few weeks calling him the “benevolent dictator for life.”

Well, Vitalik has recently begun to respond, as he does with a series of tweets. Yet, it seems that Roubini has been less than responsive. The one direct response that I did see contained facts that were quite obviously inaccurate.

0293032900121Ethereum was created on July 30th, 2015!!!

There’s no possible way that anybody was thinking about switching it to POS in 2013.

Jaime Dimon famously called bitcoin a fraud, but he did recant. The president of the Bank of International settlements called it a ponzi scheme, but he has recanted too. It seems that Roubini is increasingly standing alone in his anti-crypto campaigning efforts.

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation. The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro. Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose. Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies are not supervised by any EU regulatory framework.