Bitcoin has experienced a crazy week that saw it plumb the depths of $3,850 last Friday before spending the rest of the week in recovery and ending up this morning topping out at a scarcely believable $7,150. This staggering 85% recovery has surprised almost everyone, but does it mean we’re out of the woods or is there more pain to come?
If Bitcoin’s crash was down to a complicated mix of factors, its recovery isn’t any less complicated. As we have seen, Bitcoin’s performance is tied in many ways to the performance of the global stock markets, which in themselves are heavily linked to the impact of the coronavirus.
Some people, such as our recent interviewee @Super_Crypto, believe that recent developments mean that, indeed, we have seen the worst of the action:
As of now it appears that Chloroquine May Fight Covid-19
**** IF THIS Proves Correct *****
We have already made the bottom in Stocks, Gold, Silver and Bitcoin. ???
— Gold, Silver, Geopolitics & Bitcoin (@Super_Crypto) March 20, 2020
My opinion: we’ve just seen a once-in-a-decade rediculous, markets not really functioning, liquidation / capitulation bottom for the Bitcoin price
The most incredible & outrageous shake out before Bitcoin’s mining production is cut in half (>8)
— Alistair Milne (@alistairmilne) March 20, 2020
Others back up this theory, this time noting recent attempts to boost the flagging US economy:
The recent announcement that the Federal Reserve is to embark on “unlimited liquidity” has certainly made many bullish on Bitcoin, but whether this is having such an immediate, direct impact is doubtful.
Where Next for Bitcoin?
Bitcoin has naturally retraced from its spike to $7,150, with its final resting place after this move potentially giving us a guide as to its inherent strength. On a lower timeframe we can see that Bitcoin has established a series of higher highs and a higher lows after its drop to $4,445 on Monday, suggesting that Bitcoin could drop to the $5,800 region and still be in an overall uptrend:
In many ways, fundamentals are still piloting the ship at the moment, and not Bitcoin’s fundamentals, which haven’t changed one bit during the entire coronavirus crisis – if anything, Bitcoin’s fundamental properties have only been enhanced due to bank withdrawal limits being imposed across the country.
No, the fundamentals Bitcoin remains tied to are those of the economy as a whole, which is still in a state of fragility. Every minor recovery in major markets this week has been followed by a further crash, and if this pattern is echoed once again next week then there is little chance that the Bitcoin price will remain at current levels, especially given that many thousands of the Bitcoin sent to exchanges by institutional clients remains unsold.
It is not far-fetched to think that these big sellers have helped push the Bitcoin price up to the $7,000 level in order to maximize their profits (or more likely minimize losses) before the market takes its revenge.