- Gold is probably hit more than it should be, down 3.3% today
- Below $5,200 Bitcoin is “highly dump susceptible,” it needs to go back above $6,250 to “feel relatively safe”
In yet another sell-off, Bitcoin price has dropped about 25% from yesterday’s high of $5,900, at the start of what looks like to be another bruising week. Altcoins followed the leading cryptocurrency, resulting in wiping out $30 billion from the entire market capitalization.
Yesterday, the Federal Reserve slashed the interest rates to zero and launched a $700 billion QE program. This led to a spike in Bitcoin price yesterday, which took the digital currency to nearly $6,000. But soon after the prices came tumbling down.
Bitcoin having a strong reaction to that Fed announcement. pic.twitter.com/zpRtMoNPRs
— Mati Greenspan (tweets are not trading advice) (@MatiGreenspan) March 15, 2020
While the traditional markets were closed during the weekend, Bitcoin was front-running the news.
Is this what they mean by institutional buyers lining up https://t.co/YC2ESM2DWN
— Squeeze (@cryptoSqueeze) March 15, 2020
Stock market tripping circuit breakers
Today, major European stock indices are down 10% to 14% while the US stocks hit “limit down,” with investors responding to the rapidly escalating economic hit from the coronavirus.
Contracts on Dow Jones Industrial Average, Nasdaq 100, and the S&P 500 all sank about 5%, triggering their market circuit breakers. ETFs recorded even bigger losses in the premarket.
All of this has been despite the Fed and other central banks dramatically stepping up their effort to stabilize the financial markets and liquidity. However, so far, they failed to boost the sentiment. Jason Daw, a strategist at Societe Generale SA in Singapore said,
“In normal circumstances, a large policy response like this would put a floor under risk assets and support a recovery.”
“However, the size of the growth shock is becoming exponential and markets are rightfully questioning what else monetary policy can do and discounting its effectiveness in mitigating coronavirus-induced downside risks.”
While the dollar was little changed, the Japanese yen strengthened. Treasuries sank 0.31% with the yield on 10-year treasuries fell to 0.76%.
Investors are selling whatever they can
Gold has weakened 3.3% to $1,478.95 an ounce today. The bullion rallied late Sunday after the Fed made a surprise announcement of slashing its benchmark interest rate to zero and implementing quantitative easing, a bond-buying program of at least $700 billion. The gains, however, soon gave way to losses.
Gold & silver smashed as traders continue to liquidate anything they can find. At some point, given the $700B we’re printing & the trillions global banks are printing, these will be the best performing assets for years to come IMO. The question is where’s the bottom right now?
— Quoth the Raven (@QTRResearch) March 16, 2020
While pressure on assets and looser monetary policy are perceived as risky and seen as a positive for gold, the metal has been seeing weakness in recent sessions with leveraged investors dumping their positions en masse.
“We are in a scenario where investors are selling whatever they can and this has also affected gold, probably more than it should be,” said Carlo Alberto De Casa, chief analyst at ActivTrades.
Bitcoin Needs a Push
Looks like the same is happening with bitcoin which went down to $4,435 but is currently back to rising up. For now, cash is king but with the Fed keeping on printing money, it could devalue while 1 BTC will always remain 1 BTC with no more than 21 million of supply ever.
Interesting investment dilemma:
Every market dumped last week, which means "cash is king" … But if the government keeps pumping out more money to fight a recession the value of fiat could be devalued as well.
— ฿TF%$D! (@CryptoHustle) March 15, 2020
For bitcoin to “feel relatively safe,” it needs to go back above $6,250. The price remaining below $5,200 has the digital asset “highly dump susceptible,” said trader Mr. Anderson.
According to trader CryptoMichael, “Might be a creation for bullish divergences on higher time frames, but just too fragile at this point.”
His levels to watch include a clean break of $4,800 with support levels present at $4,100-4,250 & $3,700-3,800.