Bitcoin During Market Turmoil

Despite a stimulus driven ‘dead bat bounce’ last night the broader picture for markets remains on tenterhooks.  Today we discuss how Bitcoin fits into this picture.

Digital currency markets have been consolidating since the initial price drop on February 26 that saw $25 billion shaved off the entire cryptocurrency market. The crypto market cap is hovering just above the USD 225 billion zone.

On March 1 2020, most digital currencies have been consolidating into a triangular pattern and a slew of assets have been forming firmer support zones. During the course of the last week, and especially this Monday, global stocks have crashed significantly. The crash has been widely blamed on the coronavirus (COVID-19) and stocks haven't been routed this hard since 1987. Currently, the entire market cap of all 5,000+ coins is around USD 225 billion. BTC has been hovering between $13,800 to $11,600 during the last 48 hours and the currency is down 7% for the week, with many seeing it as a perfect time to accumulate more. Still, in 2020 BTC is up 20%.

Bitcoin’s (BTC) price has had a slight pullback but that’s nothing compared to the broader market havoc. From the coronavirus scare to an oil price war, a confluence of factors made a very rough Monday.  Only the promise of more stimulus saw a ‘dead bat bounce’ last night, but for how long is uncertain.

Longer-term, the market will be more driven by fundamentals, and the future is increasingly bullish for the asset class. Therefore, we have continued to buy on key support levels.

There is potential that we could be at the start of a financial crisis part two…

So should we be worried about Bitcoin retracing during the recent global market turmoil?

Bitcoin’s S2F model is a long-term prediction which takes data from the previous Bitcoin halving events and calculates a range where prices are likely to follow in the future. According to its creator, PlanB, a pseudonymous Bitcoiner on Twitter, the latest flash crash is still well within the projected constraints of the model, despite the state of panic in the market right now.

After the previous two halvings, we saw the Bitcoin price enjoy a huge bullish rally causing a significant hike in prices.

Typically, Bitcoin’s price leading into the halving has declined, then gone parabolic into the event, followed by a retracement. Usually, the epic gains sparked by the halving are not instantly apparent and can take up to a year after to materialize.

From a macro perspective, the short-term volatility in Bitcoin price can be seen as noise. Even though we are having market meltdowns in the Dow, S&P 500, and petroleum, Bitcoin’s long-term bullish trend remains intact.

As traders in other markets are forced to sell volatile/risky investments to meet margin calls for other markets, Bitcoin and gold could see downward pressure on price. This is why we saw the two safe-haven assets lose value yesterday. History tells us we could expect them to make gains as investors move away from risk and towards safety after this wakeup call. So, the market is moving as expected. Once investors give up on their volatile and risky positions, they normally run to the uncorrelated and safe assets such as precious metals and cryptocurrencies.