The economist added that the “buy on dips” sentiment led to a rebound in equities toward the end of the week.
Explaining the plunge in Bitcoin over the previous week, the economist stated that people bought into the cryptocurrency’s adoption, which attracted a lot of speculators to the cryptocurrency.Bitcoin prices have declined by over 4% over the previous five trading sessions, with the cryptocurrency hovering at $70,085 at the time of writing.Analysts at Schwab Center for Financial Research stated that the decline in AI stocks, as well as software companies, last week was a result of profit-taking to some extent.
Mohamed El-Erian, Chief Economic Advisor at Allianz, explained the volatility in the equities, commodities, and cryptocurrency markets last week, reportedly stating that it was “mainly technical.”
“It was mainly technical. It was a deleveraging that started in the most speculative parts of the market.. silver, bitcoin, etcetera, and started contaminating others,” he said during an interview with CNBC.
The economist added that the “buy on dips” sentiment led to a rebound in equities toward the end of the week – the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite indexes ended Friday with gains of between 2% and 2.5%.
“The week before was policy news. This week is going to be all about data. It’s a fascinating time to be observing and participating in these markets,” he added.
El-Erian Explains Bitcoin’s Decline
Explaining the plunge in Bitcoin over the previous week, the economist stated that people bought into the cryptocurrency’s adoption, which attracted a lot of speculators to the cryptocurrency. “Then you got a shakeout,” he said in the interview.
Bitcoin prices have declined by over 4% over the previous five trading sessions, with the cryptocurrency hovering at $70,085 at the time of writing.
“The fundamental theme for Bitcoin is continued institutional adoption, and it’s going to be volatile until that resident base of investors, not tourist investors, becomes big enough to absorb,” he added.
Bitcoin prices fell to $67,000 last week, and the cryptocurrency is currently trading lower by nearly 21% year-to-date.
El-Erian noted that this effect was visible in silver as well as, to a certain extent, gold, too.
Analysts Point To Profit Taking
Analysts at Schwab Center for Financial Research (SCFR) stated that the decline in AI and software stocks last week was partly due to profit-taking, following rallies in companies like Advanced Micro Devices Inc. (AMD) and Micron Technology Inc. (MU).
AMD stock is up nearly 7% over the past month, while MU stock is up more than 12%.
“Segment leaders like Nvidia and Broadcom keep struggling to find new buyers as investors worry about the AI story possibly growing weaker over time,” the firm stated in its latest note.
SCFR added that the data this week could go a long way toward “sorting things out” in terms of the economy.
Meanwhile, U.S. equities gained in Monday morning’s trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up by 0.67%, the Invesco QQQ Trust ETF (QQQ) rose 0.95%, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) edged up by 0.01%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘bearish’ territory.
The iShares 7-10 Year Treasury Bond ETF (IEF) was up by 0.02% at the time of writing.
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