What's Behind The Bitcoin Crash?

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Posted: Sep 24, 2021 1:27 PM
What's Behind The Bitcoin Crash?

Source: AP Photo/Andy Wong

Although yesterday’s session cooled into the close, it was clearly a strong showing, which was being counted out for several reasons on Monday – mainly because many felt it was just due for a pullback.

Utilities (XLU) were down for the eleventh straight session, tying a record dating back to the sector’s inception in 1998. I’m not sure what it means. However, if the ultimate defensive sector has been hammered to this degree, considering all the anxiety over the past two weeks, it could be a harbinger of the spending push in Washington, D.C. to come up short.

S&P 500 Index

+1.21%

 

Communication Services XLC

+1.03%

 

Consumer Discretionary XLY

+1.01%

 

Consumer Staples XLP

+0.37%

 

Energy XLE

+3.50%

 

Financials XLF

+2.45%

 

Health Care XLV

+0.72%

 

Industrials XLI

+1.53%

 

Materials XLB

+1.42%

 

Real Estate XLRE

 

-0.49%

Technology XLK

+1.34%

 

Utilities XLU

 

-0.53%

 

Market Breadth

NYSE

NASDAQ

Advancing

2,140

3,244

Declining

1,133

1,207

52 Week High

102

130

52 Week Low

33

50

Up Volume

3.11B

3.23B

Down Volume

787.41M

935.60M

What a difference a few days make, as the sea of red morphed into a sea of green. I’d like to see some equilibrium at this point with the bias back to the upside.

Portfolio Approach

There are now weighting changes this morning to our Hotline Model Portfolio.

Today’s Session

China is dominating the financial news headlines with a double whammy of more Evergrande drama. It appears a debt payment was missed and the PBOC is stating it believes all cryptocurrency transactions are illegal.

Bitcoin is off 7.6% on the news that some are saying isn’t new but certainly a louder, firmer affirmation of China’s discontent. Interestingly, I think there might also be a tie-in with the latest on Evergrande, which dropped 17% in overnight trading as the mystery deepens.

I suspect there is serious capital flight out of China, and authorities there are trying to cut off all the spigots, including crypto.

Another theory is China desperately needs all the electricity it can generate and must stop crypto mining, which consumes enormous amounts of power.

The market keeps careening up and down this week, but I think it’s a good thing for a number of reasons that I have mostly mentioned in commentary.  We are watching more good news on Covid19 cases as the biggest key for the stock market beyond the risk story of the day.