Amid Crypto Market Sharp Downturn, Traditional Stock Markets Seem to Collapse as Well

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by Teuta Franjkovic · 7 min read
Amid Crypto Market Sharp Downturn, Traditional Stock Markets Seem to Collapse as Well
Photo: Rafael Matsunaga / Flickr

Tech stocks overall were hit hard Tuesday as the Nasdaq Composite Index slid another 1.7 percent. Facebook and Alphabet are just two of the companies that make up the group of large tech stocks commonly known as FAANG.

It’s true. We can not anymore say it’s only the crypto market. It definitely had a weeklong downturn that has forced the bitcoin price to its lowest point in almost 14 months but it appears that traditional markets do not intend to welcome investors back with open arms.

Cryptocurrencies have been hit harder though, at least on a percentage basis. This week’s sell-off dropped the cryptocurrency market cap below $150 billion, with the bitcoin price briefly sinking to $4,617 on Coinbase — its lowest mark since the first week of October 2017.

On Monday, Nov. 19. According to the charts on CoinMarketCap, cryptocurrency market lost a whopping $25 billion in just last 24-hours. At the press time, the crypto market valuation is at its one year low at $152 billion.

In the last one week, the crypto market correction has gone even worse. In last one week, the crypto market has lost nearly $60 billion of its valuations with Bitcoin and other altcoins taking a major hit. The free fall in crypto prices is pretty steep at the moment.

Noting the correlation between the tech and crypto retracements, Mati Greenspan, senior market analyst at eToro, said that it’s:

“Impossible to shake off the feeling that somehow the current sell-off in tech stocks is somehow related to what we’re seeing with the cryptos.”

At the time of writing, Bitcoin has fallen to $4,617 and is the first time in more than a year the cryptocurrency has dropped below $5,000. In January, bitcoin was worth more than $14,000 and since then, digital assets have lost close to $700 billion of its market value. The cryptocurrency’s decline has also caused BTC rivals including Ethereum, Litecoin, and XRP to join the slide.

The Ethereum (ETH) price sunk to a new 17-month low at the week’s beginning, following an overnight crash which wiped $16 billion off the global market cap and ushered in a continuation of last week’s dip.

Current Sell-Off in Tech Stocks Very Much Related to Cryptos

Combined market capitalization losses since their 52-week highs hit $1.02 trillion on Tuesday guided by the Amazon’s $280 billion. Facebook lost $253 billion as much as Apple while Alphabet lost $164 billion. Netflix is on the end of this unfamous scale with “only” $67 billion of lost.

Apple Inc.’s stock AAPL, +1.00% made it unanimous Tuesday, as it fell 4.8% to the lowest close since May 3, helped there by a price target cut at Goldman Sachs. The stock closed 23.7% below its Oct. 3 record close of $232.07. Apple‘s last bear market started on Aug. 21, 2015, and didn’t end until Aug. 9, 2016. The stock fell as much as 32% during that downturn.

Just for reminder, Goldman analyst Rod Hall cut his stock price target to $182 from $209, citing concerns over “deteriorating demand,” following the technology giant’s disappointing holiday season guidance and revenue guidance cuts from multiple smartphone suppliers.

One of the biggest losers is definitely Facebook whose stocks have been hit the hardest. This morning, the price hit a new low of $126.85, which is more than 40% below its high in July of $218.62. In total, Facebook’s value has dropped by over $253 billion.

Social network is continuously grappling with scandals over data privacy, the spread of disinformation, and faulty metrics, analysts and advertisers have continued to hammer away at the company. It remains to be seen whether this is just a blip or a sign of continued tough times for both Wall Street and tech.

For Facebook, it’s not just a market problem but reflective of an internal struggle. Following the most recent revelations about the company’s inability to fix its platform while allegedly waging a secret PR war against those critical of it, this could be the beginning of a big shift. Now, investors will wait to see if the company can rebound or at least stay calm.

Alphabet Stocks Fell Due to Accusations of Harassment

While Facebook turned negative a few months ago, Alphabet became the second major tech company to go negative. Alphabet’s last bear market ended on Oct. 14, 2011, or a little less than three months after it started. During that selloff, the stock lost 21.1% at its bear-market bottom.

Google parent stock GOOGL, +0.29% entered a bull market on Monday, when it closed 20.1% below its July 26 record of $1,285.50. The stock inched up 0.3% on Tuesday.

Google employees walked out of offices around the world earlier this month after The New York Times reported that the company had paid out a $90 million exit package to a former executive who was accused of sexual misconduct. Just for reminder, after The Times article was published, the company revealed that it had fired 48 people for sexual harassment over the last two years and that none had received an exit package.

Sundar Pichai, Google’s chief executive, and Larry Page, a co-founder of Google and the chief executive of its parent company, Alphabet, apologized. And one of the executives whom Alphabet continued employing after he was accused of harassment resigned, with no exit package.

Amazon stock was up 1.5% during morning trading, vs. a 5.1% drop on Monday. The stock closed down 1.1% to 1,495.46. It’s down 26% from its high of 2,050.50 on Sept. 4. That’s the day Amazon’s market cap briefly moved above $1 trillion.

Amazon reported third-quarter results on Oct. 25 that fell short on revenue and gave a weak fourth-quarter revenue forecast. The company gave fourth-quarter revenue guidance in the range of $66.5 billion and $72.5 billion, a well-below consensus of $73.79 billion. The fourth quarter is the biggest and most important sales period for Amazon because of the holidays.

Shares of Netflix Inc. FB, +0.81% FB, +0.81% FB, +0.81% have been in a bear market since Oct. 24, which was just about three weeks after the previous one ended. Facebook Inc. FB, +0.81% been in a bear market the longest, since July 30, or only about three months after the preceding bull market started.

Janney Montgomery Scott technical analyst Dan Wantrobski said the loss of leadership from the technology sector in general, and more specifically the FAANG stocks, which had been a “significant driver of the markets” for the past few years, is one of the reasons the broader U.S. stock market continues to struggle.

“Our analysis continues to suggest that this segment may continue to underperform the broader markets for some time longer.”

Meanwhile, the Nasdaq Composite Index COMP, -1.70% of which all the FAANG stocks are components, has declined 14.8% from its Aug. 29 record close of 8,109.69; the Dow Jones Industrial Average DJIA, -2.21% has lost 8.8% since closing at a record 26,828.39 on Oct. 3 and the S& P 500 index SPX, -1.82% is 9.9% below its Sept. 20 record of 2,930.75.

Corrections Will Probably Continue

Cryptocurrency analysts agree that the crypto market correction can continue further. The truth is, the latest prices tell us the trend has been bearish since crypto’s parabolic move and top in 2017. Though the market conditions are not the same if we compare the last parabolic move for Bitcoin in 2013 to today’s market we still have some time to go before the trend reverses. The last bear market was more than 600 days and at the time of this writing, the current bear market has only been 344 days.

Though the two are not the perfect comparison analysts think it’s important to note and keep in mind. Most indicators have bottomed out and reached new lows we haven’t seen for a long time on Bitcoin. Boom and bust cycles are nothing new for crypto and I believe we still have some time to go before reaching the bottom.

Bitcoin News, Cryptocurrency News, News
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