Bitcoin has begun the biggest week of its life that will very likely shape its short- and possibly its medium-term future. Following the crash to $3,850 last week, which was caused by a confluence of factors including institutional investors cashing out and Bitcoin margin platform inefficiencies, Bitcoin sits at a precipice, staring down the barrel of further drops to the $2,000 level or lower. How the global markets perform in the wake of the continued threat of the coronavirus will do much to dictate where Bitcoin goes from here.
Trump’s Market Stimulus Put to the Test
Late on Friday, US President Donald Trump announced a raft of measures aimed at tackling the spread of the coronavirus which has seen stocks, metals, and Bitcoin all crash massively in the past two weeks as investors run to cash.
On Sunday, the Federal Reserve also announced that it was cutting interest rates to zero and injecting $700 billion into the economy in order to shore it up. The knock-on effect of this action will be seen as the markets open on Monday, with Bitcoin likely to respond in kind.
Bitcoin at the Mercy of Higher Powers
While Bitcoin has proved to be an uncorrelated asset in the past, and even at the very start of this crisis, as we predicted back in 2018 it cannot stem the tide of a continuous sell off in the markets forever and has suffered with the rest, crashing from $10,500 to $3,850 in one month.
Last week’s crash was initially blamed on margin platforms like BitMEX causing rolling liquidations and artificially pushing the price down, but evidence has since emerged that much of the initial selling was in fact down to institutions selling Bitcoin to cover margin calls;
Institutional investors that were vested in #bitcoin are getting hammered in traditional markets.
They are overextended and are selling off their #btc to cover their margin calls.
This will drain the swamp, and end any equity/crypto market correlation.
— ?☣️ Keith Wareing ?? (@officiallykeith) March 12, 2020
This is not a new phenomenon, and it regularly happens with gold, which was also down 10% before the weekend for the same reason.
Some, such as Bitcoin cartel theorist @Super_Crypto, have called for $1,000 Bitcoin as the pressure on the world economy continues to grow, but its strong response to Thursday’s crash, which saw an immediate 50% spring, has given bulls hope that the worst is over.
All eyes will be on the markets when they open on Monday, as the world waits to see if Trump’s measures, quantitative easing, and the temporary elimination of interest rates is enough to stimulate the markets and help protect Bitcoin from falling into the abyss.