The markets are feeling shaky again as money moves with force. Automated selling, low liquidity and hedging flows are starting to become more important than fundamentals.
With US stocks under pressure, there is a growing risk that the stress will spread to other assets (such as crypto).
Systemic selling and a liquidity-driven market
Financial giant Goldman Sachs recently warned that the sell-off in US stocks is far from over.
Trend-following CTAs have already triggered sell signals in the S&P 500, and the company estimated that these funds could sell up to $33 billion this week! If the weakness continues, total sales will reach $80 billion next month.
Source:
What’s important is that sell this is not dependent on bad news. Even in flat or slightly higher markets, CTAs are still expected to reduce exposure.
Markets remain unsettled, making it difficult to trade without prices moving, and this season is generally weak. If volatility continues, many automated funds may continue to sell off, which could drive prices down even further.
The technical positioning only makes the situation worse
When the S&P 500 fell below 6,900, options traders had to sell more as prices fell to stay covered. That’s why a small 1% move can feel much bigger.
Forced selling and low liquidity are causing several assets to move together, so there is a chance that the stock market tension will spread to crypto, bonds and commodities.
Is Bitcoin Closer to its Bottom?
As venture markets struggle, some analysts see a different path. According to Michael van de Poppe, Bitcoin’s weekly RSI is is located on the lowest level since the cycle bottoms of 2018 and 2022. This zone is usually associated with capitulation.
At the same time, Bitcoin’s valuation relative to gold is at its lowest level ever. Gold seems to be stagnating after a strong run, and this has happened so far before the BTC rotations in 2011, 2016 and 2020.
Source:
US economic figures are calmer and some policy updates are coming soon (CLARITY ACT). That could help bridge the gap between how scared the markets feel and what the fundamentals actually look like.
Volatility is still a risk in the short term. But the big picture? Bitcoin may be closer to the bottom than many people think.
Final thoughts
- Forced flows drive market movements.
- Downside risk remains for BTC, but capitulation may already be underway.