Not Just Bitcoin, Oil Price War Brings Treasuries to a New Low While Stock Market Tumbles

  • Oil price falls to cost levels as OPEC and Russia starts an oil price war
  • Everybody buying Treasuries has its yield sinking to a new low of 0.4655%
  • Meanwhile, coronavirus cases mounting in America with the death toll rising globally
  • Gold hits 7-year high at $1,700 but bitcoin could move further lower

In yet another sudden drop in prices, Bitcoin tanked hard, going as low as $7,685 last week, a level last seen in early January. From a 2020 high of above $10,500 on Feb. 13, bitcoin has crashed nearly 27% in value.

At the time of writing, we were still below $8,000, trading at $7,808 while managing the daily trading volume of over $2 billion.

However, it’s not only the crypto market that is experiencing a bloodbath. Trader Crypto Squeeze points out,

“If you think Bitcoin is having a bad day, have a look at the crude oil price. It's down by 30% today alone. And 54% since Jan 2020.”

Oil Price War Begins

After the past two weeks of severe sell-off in the stock market caused by the fear of the economic impact of coronavirus (covid-19), this weekend, the oil price war has the market tumbling.

OPEC and Russia have started an oil price war that according to Goldman Sachs Group, could push crude into $20s. Brent crude at a low of $20 a barrel will completely change the outlook for oil and gas markets, where some producers can operate.

“We believe the OPEC and Russia oil price war unequivocally started this weekend,” the Goldman Sachs’ analysts said.

“The prognosis for the oil market is even more dire than in November 2014, when such a price war last started, as it comes to a head with the significant collapse in oil demand due to the coronavirus.”

Last week, OPEC and its allies failed to reach an agreement to extend the output cuts which started this war on already roiled prices of oil. Over the weekend, Saudi Arabia slashed its selling prices while planning to lift the output above 10 million barrels a day.

US 10y yield Crashes Below 0.5%

The safe haven asset Treasuries have been seeing increasing demand during this sell-off that has the yield tanking. Since the last two weeks, the yield on 10-year Treasuries has sunk to new lows which briefly went down to an all-time low of 0.4655%.

As a matter of fact, the entire curve is trading below 1%, for the first time in history. Markets are also pricing for the Federal Reserve to cut policy rates to 0% in the coming months.

This bond rally was also fueled by an all-out price war among the world’s largest crude producers.

“The market is panicking,” said Shinji Hiramatsu, a senior investment manager at Sompo Japan Nipponkoa Asset Management.

“Position adjustment, loss-cut buying and all sorts of buying are emerging. Everybody’s buying Treasuries.”

This bond rallying is “unchartered waters” that makes a global recession a probability now and not a possibility. Now, it has been speculated that the US central bank will deploy unconventional policies to combat global financial crisis as “there’s almost nothing left but renewed QE.”

Gold to New Highs, Bitcoin to the Downside

US stocks continue to tumble triggering exchange rules that limit decline at 5% as oil price war added to the backdrop of dread surrounding the deadly virus that has infected 108,000 people and killed over 3,700.

The spreading coronavirus had investors on edge for weeks, now the crude prices that are in free fall sees no market bottom soon.

Meanwhile, this is a good time for gold which according to trader Tone Vays doesn’t have any “resistance” keeping it from rising to new all-time highs. For the first time in 7 years, gold jumped to $1,700.

When it comes to bitcoin, though the outlook has turned bearish with the macros factors affecting the market, Vays keeps on to his extremely bearish outlook,

“all bearish targets are back on the table with a Weekly Red 2 under Red 1 while breaking short & intermediate Moving Averages on Weekly Charts. BTC has never fallen under 200 Week SMA.”

According to his 2020 outlook, the new lows are at sub $6,000 and if the price falls below $6,500, Vays sees bitcoin in the vicinity of $5k before halving in May 2020.

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