Bitcoin Price Action: Oil Plummets, COVID-19, Stocks Drop; BTC to Move Lower Before Consolidating
Bitcoin is down 3.1% since yesterday, dropping below its 20-day exponential moving average. Continuing the trend of bitcoin correlating with the movement of major stock market indexes, the S&P 500 lost 1.79% while the Dow Jones Industrial Average lost 2.4%.
Major indexes have been on a path of recovery since the crashes in February. The stock market has been buoyed by the Federal Reserve’s decision to loan $1.5 trillion dollars to banks so they may buy bonds of vulnerable companies. Optimism is also seen in the ongoing coronavirus pandemic, as some countries have successfully flattened the curve of deaths and infections. Plans for lifting quarantine restrictions have been announced in countries such as New Zealand and Australia.
The talk of the day was that for the first time in history, oil prices have plunged below zero as demand collapsed around the world. Futures contracts also took a massive hit, with WTI crude oil futures finishing at -$37.63 a barrel overnight, dropping from $55.90, or a 306% decline.
Despite the negative fundamentals on bitcoin’s price, the coin is trading horizontally after breaking out of two bearish wedges on the daily charts. On the four-hourly charts, momentum is no longer in the bull’s favor, with it shifting into negative territory over the short-term.
Buyers did their best to keep the prices from dropping further, recovering 1.6% and 1.48% on the green candles. Unfortunately for buyers, the pressure proved to be too strong in order for these levels to hold, which pushed the price below the lower standard deviation in the Bollinger Bands.
Prices at bitcoin’s current level could be considered to be oversold, so there may be a bounce from this band back towards its support at the important psychological level of $7,000. Prices held above $7,000 with little resistance since April 16, but momentum must first reverse before this upside potential can be reached.
The bearish wedges on the daily chart had a significant impact on bitcoin’s price. Now that prices have broken this pattern, bitcoin may fall too even lower levels before consolidating.
One aggravating factor in bitcoin’s descent was a bearish divergence in volume. Prices continued to rise while the coin’s volume shrank, which is abnormal behavior that can lead to a reversal in price action. This, combined with the two wedge formations that were completed set bitcoin up for its move below $7,000.
For the action moving forward, bitcoin is moving lower and will need some time to consolidate its losses before it can shift higher.