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bitcoin stock market bubble
Nexo

Bitcoin At Risk Of Plunge Through Support If Stocks Turn Down

Tony Spilotro by Tony Spilotro
3 months ago
in Bitcoin
0

The overextended stock market bubble was already close to bursting, but some recent turmoil involving skyrocketing GameStop shares and a Reddit-driven short squeeze might break the already thin ice. If this happens, and the stock market turns down in a big way while Bitcoin is on critical support, there could be another sharp plunge across the greater market.

GameStop: The Short Squeeze That Rocked The Stock Market

Legacy markets are in an uproar today, following the ongoing epic short squeeze in GME shares. Melvin Capital, a large hedge fund, opened a sizable short position against the aging video game retailer. Users of the WallStreetBets sub-reddit instead bought up shares, driving up prices and causing one of the largest short squeezes on record.

Losses are said to have reached in the billions, while GME shares have risen from a 2021 open of under $20 to just under $350 at the time of this writing. Losses are said to have reached the billions. Meanwhile, those involved in the plan have shared screenshots proving they’ve turned $50,000 positions into upwards of $20 million.

RELATED READING | THE THREE FACTORS THAT COULD TOPPLE THE RECENT BITCOIN RALLY

GameStop shares being this overvalued is a sign that the current bubble and market exuberance is spiraling out of control, and its causing overall market sentiment to shift.

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If legacy markets like stocks begin to turn, all while Bitcoin is on the ropes at $30,000, it could lead the crypto market into a much deeper plunge.

 

Legacy Markets Turning Down Could Take Bitcoin Down With It

The same panic isn’t in the air as the last time the stock market took down Bitcoin but the risk remains high of the prior correlation returning. After Black Thursday, stocks and crypto entered a bull market despite the state of the economy.

From the lows set that day, Bitcoin climbed 1000% from $3,800 to over $42,000, and major US stock indices all set new all-time highs and then some.

But with exuberance reaching levels of insanity, negativity surrounding the recent situation beginning to shift sentiment, and with both crypto and legacy markets on thin ice, a much deeper selloff could ensue.

What investors and traders will need to figure out from there, is if it is an opportunity to get into position lower in preparation for another leg up, or if the bubble has popped and the upside is over for some time.

RELATED READING | BITCOIN ON-CHAIN DATA INDICATES EXTREME PROFIT TAKING UNDERWAY

Markets are indeed irrational currently, but according to famed economist John Maynard Keynes, “markets can stay irrational longer than you can remain solvent.”

Melvin Capital learned this the hard way, and if markets turn down from here, others will too.

Featured image from Deposit Photos, Charts from TradingView.com
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Tony Spilotro

Tony Spilotro

I'm Tony Spilotro. Behind the pseudonym, I'm a digital media executive and global remote work leader with a decade of content experience and excellent. Here, I explore my newfound passions pertaining to privacy, finance, economics, politics, cryptography, property rights, and other libertarian-esque views. I am a Bitcoin evangelist, maximalist, and educator whenever I can be, helping to spread its message of freedom from government control, monetary policy mismanagement, and passing the buck - literally – to future generations. My journey from a curious retail crypto investor to a serious Bitcoin advocate, trader, and technical analyst is an unusual one, but life-changing nonetheless and has become less about money and more about a long-overdue revolution. While a firm believer in the laws governing math and science, I am profoundly fascinated by the impact of astrology and astronomy including moon and solar cycles and planetary alignment and their ability to influence and potentially predict markets. It hasn't yet clicked for me as to how to put anything to use, but I consider it my current rabbit hole I can't yet dig out of. My perspective of growing up alongside the internet, the dot com era, the Great Recession, and roots in video games collecting coins and rare items caused Bitcoin to immediately make sense to me. Through all of these lenses, I seek to produce content that is educational and entertaining, and I thank you sincerely for taking the time to read what I have to say. Please follow me on Twitter and feel free to drop me a line if you would like to work together.

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