Bitcoin and Ether are Rolling Over. The Crypto Chaos Might Not Be Over

• Bitcoin (BTC) fell close to 33% from its peak to around $84,000 amid a broader tech sell-off.

• Strategy (MSTR) shares dropped 63% from their high as the company continues buying Bitcoin during the decline.

• Strategy was excluded from the S&P 500 and may face exclusion from other indices during Bitcoin’s downturn.

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There’s a bit of a panic going on in the crypto markets, to say the least, with Bitcoin (CRYPTO:BTC) and Ether (CRYPTO:ETH) both tumbling by a high double-digit percentage in the past month. With Bitcoin hovering around $84,000, there’s concern that more pain could be in the cards as the technical picture gets a bit nastier. And if the broad tech sell-off drags its feet all the way into year’s end and perhaps into some part of the new year, perhaps even the weekends could prove turbulent for the top crypto tokens.

Either way, it’s been a nauseating ride for crypto investors, and as some of the plays on crypto assets also begin to fold, questions linger about Bitcoin’s suitability as a replacement for risk-off assets such as gold. Though time will tell how the biggest bulls on cryptocurrencies, like Fundstrat’s Tom Lee who’s a big fan of Ether, adjust if the negative momentum persists over the coming weeks, I do think that it’s always wise to be prepared for more downwards action as crypto markets navigate through a storm and perhaps a lengthy crypto winter, just in time for the holiday season.

Personally, I wouldn’t brave the latest plunge in Bitcoin, now that the digital token has shed close to a third of its value in short order. While I would consider giving the largest crypto a second look, should they hit the $60,000-63,000 range, an area of strong support, given the 2024 consolidation channel as well as the two highs in 2021, investors shouldn’t opt to invest any cash they wouldn’t be willing to part with.

At the end of the day, cryptocurrencies are an incredibly volatile asset, to say the least. But, at the same time, volatility can work in both directions, with some of the biggest swings coming not all too far behind some of the worst implosions. Though there could be more room to the downside over the short- to medium-term, I wouldn’t write off the asset class entirely, especially if the tech trade settles down and the risk appetite risks up, moving into bargain-hunting mode, rather than a rush to the exits.

After such a vicious sell-off, perhaps a name like Strategy (NASDAQ:MSTR) might be worth picking up if you’re a believer in the longer-term future of Bitcoin and its ability to not only return to the $100,000 mark, but to power even higher.

Shares of Strategy, formerly known as Microstrategy, are down far more than Bitcoin, now off close to 63% from its peak. The crash has been quite severe, but if we are in for a turn at some point down the line, Strategy stock might have more room to rally, especially since the firm has been buying more Bitcoin on recent weakness.

For now, Strategy shares won’t be going in the S&P 500. And it might face exclusion from other indices as well as Bitcoin enters one of its nasty declines. While Strategy will probably only turn the tide once Bitcoin sees relief, I view the name as one of the better ways to play a reversal. Perhaps next month, Bitcoin will reach a support level that would make buying the dip seem less reckless. In the meantime, I’d much rather turn to gold for stability amid volatility.

In prior pieces, I noted that gold would probably outperform cryptocurrencies, especially Bitcoin, over the foreseeable future, especially as investors took more of a risk-off approach in response to the market pullback and fears of an AI bubble.

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