The stock and cryptocurrency markets were on edge on Monday as a sell-off wave gripped both counters. The sell-off came amid growing tensions and uncertainty in Washington as house speaker Nancy Pelosi laid down an ultimatum for Vice President to invoke the 25th amendment. Pelosi has made it clear that the House will impeach President Donald Trump.
While the markets did ignore the first impeachment, things could change with the second impeachment even as President-elect Joe Biden looks to ascend to power. Second impeachment matters, given that if successful, it would mark the end of Trump’s political career, which to investors matters a lot.
Likewise, there is growing concerns on Wall Street that a second impeachment will deepen the partisan political divide at a time when Americans are greatly divided. A divided political base could make it extremely difficult for the incoming president to pass legislation, some of which are highly needed to resuscitate the struggling economy.
Likewise, the markets were on edge as investors braced themselves for the start of the earnings session. Later in the week, a number of companies led by financials and airlines are poised to report Q4 earnings results. The earnings reports’ outcome could set the tone in the stock market heading to the January 20th presidential inauguration.
Major indices finished the first day of the second week of the year on the red in response to Washington’s rising political tensions. The Dow Jones Industrial Average fell 0.29% or 89 points after recouping some of the losses accrued after tanking more than 200 points. The S&P 500 was also on the receiving end declining by 0.63%.
Tech laden NASDAQ posted the biggest drop among the major indices, dropping 1.25%. The index dropped as tech giants remained the center of attention in the aftermath of Twitter and Facebook banning Donald Trump. Amazon Apple and Google ending support for conservative alternative social networking app Parler also fuelled tensions as some people reiterated it amounted to an infringement of freedom of speech.
Stocks were not the only ones on the receiving end, Cryptocurrencies also started the week on the wrong footing. Bitcoin fell sharply after failing to hold above the $40,000 record high. The cryptocurrency fell by more than 20% to lows of $32,400.
The sell-off could be attributed to, among other things, an over-leveraged market. Likewise, increased miner selling as traders moved to liquidate positions continued to accelerate the sell-off wave. Data provided by South Korea based CryptoQuant shows that Miner Position Index raised 2.20, the highest level since July 2019, signaling increased miners outflows in U.S dollars.
Panic selling also appears to have gripped the market as a sell order of 180 bitcoin on Coinbase helped accelerate the sell-off with the crypto price tanking by $1,200. Guggenheim Partners CIO Scott Minerd reiterating that current Bitcoin prices are unsustainable is another fuel that helped trigger the massive pullback. While the massive price dumb is a point of concern, some people believe it is healthy as the markets remain overheated.