Traditional markets tanked on Thursday, cancelling gains from Wednesday’s rally. Investors fear a potential global pandemic as coronavirus outbreak continues to spread throughout the United States. Companies around the globe are taking safety precautions which are bringing scare to investors. Bitcoin finally shows life on Thursday, taking a different direction than traditional markets.
Stock Market Continues To Tank
The Dow Jones tanked nearly -970 points at the time of this reporting. Yesterdays rallies quickly evaporated as market turmoil continues to surface. In addition to the Dow Jones losing -970 points or -3.5% in value, the NASDAQ and S&P500 looked no better posting:
- NASDAQ: -279 points / -3.10%
- S&P500: -106 points / -3.39%
10 Year Treasuries
The markets downward spiral was fueled by Coronavirus and the 10 year treasury. Most recently, the 10 year treasury fell to an all-time low. The 10 year treasury is extremely important because it assesses investor confidence levels. When yields are falling on the 10 year treasury, it means that demand is pouring into the “safe haven asset.” Treasuries are usually categorized as the safest investment since they are backed by the government. With the 10 year falling to all-time lows, it further explains that investor confidence right now is very low. There were clear signs of trouble last year when the yield curve “inverted”, but top wall street firms and analysts completely bypassed the fundamentals for the most part. At the time, many of these outlets stated that the issue was irrelevant based on how good the economy was doing at the time.
Coronavirus Outbreak Developments
Most recently, the Federal Reserve tried to “fuel the economy” by reducing interest rates. As Visionary Financial previously reported, we believed this to be an irrelevant move by the Fed. Trying to inject more money into the environment isn’t going to fix supply chains and production facilities that have either shut down or have been hurting due to the outbreak. The markets rallied the day after the Federal Reserve reduced rates, but we also mentioned that this was a “pre-mature rally in the stock market.”
Since then, the Coronavirus has started to spread throughout the United States causing issues on various levels. The sell-off in the stock market today can be attributed to:
- Countries extended quarantines / travel restrictions
- California declares state of emergency
- Infections in New York double overnight
- United, Delta, and American begin canceling domestic flights
- US cases jump to 197 – a total of 12 people have died
Bitcoin Price
Bitcoin price has rallied +4.39% the last 24HR which has changed sentiment a bit. During the last few drastic sell-offs in traditional markets, BTC was following the trend. This was interesting to many people, since Bitcoin price has historically hedged market turmoil. People were starting to wrap their head around the fact that during a potential “global pandemic”, Bitcoin might not be a hedge. This is simply because people will be looking to hoard cash or cash based products ( similar to treasury bonds ). During Thursdays trading session, Bitcoin hedged traditional markets following inverse price action.
Bitcoin Price May Be Rallying For Other Reasons
It’s always facinating to see Bitcoin price rally during market turmoil, but BTC may be changing sentiment for some other reasons. Most recently, there were two developments that essentially affect Bitcoin within a macro environment.
India Lifts Cryptocurrency Ban: As Visionary Financial reported in January, “Crypto vs RBI” case in India was extremely important because it would essentially determine if a cryptocurrency ban would be lifted in India. Yesterday, the Supreme court overturned the central banks cryptocurrency ban that had lasted for 2 years. This can be considered a milestone in the digital asset space, because it proves adoption is coming. For 2 years, banks and financial institutions in India were restricted from offering any service that revolved around digital currencies. With the ban being lifted, it gives India the opportunity to build within the space long-term.
South Korea Passes Cryptocurrency Laws: It was reported today that South Korea was passing legislation that would allow them to build regulatory framework around cryptocurrency exchanges and digital assets. The regulatory framework would fuel the legalization of exchanges and digital assets in the region. This was a massive move for the industry as well since so much of the South Korea population is actively investing in digital assets.
Time will tell whether Bitcoin price is acting to market turmoil or if it’s changing sentiment due to the recent developments above.
Bitcoin Price Technical Analysis
As mentioned in previous technical analysis, Bitcoin price holding the $8,600 support level could further support its surge to $9,400 levels. Right now Bitcoin seems to be coming out of “oversold” territories. We can tell this by taking a look at the RSI ( relative strength index ). Even though it’s not a tool that should be used to primarily assess price action, it does serve as a good buffer here based on the current circumstances.
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