Bitcoin Follows Stock Market, Jumps on Trump’s Pledge of “Major” Economic Support
- Stock market bounces but “Things are going to get worse before they get better”
- Bitcoin also jumped above $8,000 while gold went down
Shares around the world had their worst day since the 2008 financial crisis leading the day to be dubbed “Black Monday.” The main US financial indexes closed down by over 7% as a row between Saudi Arabia and Russia saw oil prices plunge.
For the past three weeks, the markets were already reeling from the fears of the economic impact of coronavirus. Now, the oil price war resulted in what analysts called “utter carnage.” The price of oil rose by more than 7% on Tuesday but Saudi Arabia has increased the output to a record amount of 12.3 million barrels a day in April.
The US stocks fell so sharply that the trading was halted for 15 minutes to curb the panic selling. The Dow Jones Industrial Average fell 7.8% of more than 2,000 points, the biggest point-drop in history. The S&P 500 also tumbled 7.6% and Nasdaq 2.3%.
Things to get worse before they get better
The same scene has been in the markets around the world, where South Korea puts limits on short sellers after the market slump. “There is panic setting into the market right now,” said Andrew Lo, professor of finance at MIT's Sloan School of Management. “Things are going to get worse before they get better.”
Amidst this, the coronavirus continues to spread, with a European Central bank employee testing positive and a hedge fund employee on Wall Street as well. The total infections climbed to 111,600 on Monday.
However, investors moved back into risky assets on Tuesday. European stocks are having a robust day, up 4% with Asian markets finishing up as well. Future markets are also indicating that Wall Street would open higher. The yield on US govt. debt rose slightly but remains close to record lows.
Rate Cut & QE to push Bitcoin higher if it holds macro narrative
This bounce has been on the hopes for global stimulus measures. US President Donald Trump said he would take “major” steps to cushion the impact on the economy including payroll tax cuts. Trader Rptr45 said,
“As there are talks of yet another rate cut, QE, expanding the asset types the Fed can purchase, MMT, etc… if the macro narrative holds BTC should perform well in that environment. However if BTC is just the riskiest asset on the outer edge of the curve more pain is ahead.”
Following the stock market, Bitcoin today touched $8,135, we are now trading above $8,000, rising 4%. The next “real test level will be 8620.”
I've never seen stocks and bitcoin so aligned, this is rediculous
— ₿it₿it (@BitBitCrypto) March 10, 2020
Meanwhile, the price of gold fell 1% on future markets after jumping above the key $1,700 level. Spot gold that touched its highest level at $1,702.56 on Monday since Dec. 2012, today is back to around $1,663.
Markets, however, are still showing plenty of signs of nervousness amidst the signs of a worsening outbreak of the virus in the US and the near-certainty of a recession in Europe.