The Coronavirus continues to wreck financial markets, even oil prices are seriously affected, after seeing a never-before-seen collapse of the WTI into negative territory. BTC seems to be falling due to this impact, can this affect the short, medium and long term? Today we respond with an analysis of Bitcoin, considering the oil market for this occasion.
Bitcoin analysis after falling oil
As this article is being drafted, Bitcoin is trading around $ 6,830, a price obtained after a drop of about 3% in the past 24 hours.
If we compare it with the collapse of oil, BTC has been strong in the face of the instability situation.
However, it is not a secret that this situation will affect you, that is why we decided to make an analysis of Bitcoin, considering oil prices as a factor.
Deflation for subsequent hyperinflation
The fall in oil is but a first sign of how deflationary the economy will be from now on.
With each passing day, the demand for crude oil falls more and more, but it is not the only thing. The extreme paralysis of economic activity has slowed consumption in general to surprising levels.
Despite strong injections of liquidity by central banks, consumption is not the priority for the citizen. On the contrary, he tries to protect himself from risk, reducing his expenses to the maximum and saving his money.
The dollar is the closest refuge to seek liquidity. Aiming to cover losses, expenses, debts and reduce risk exposure.
Bitcoin is ideal for those who think in an inflation environment, where the US dollar loses its purchasing power.
If we talk about this aspect, this is not the most favorable time for cryptocurrency, and it will last until life returns to normal. There, the effect will undoubtedly be the opposite, and BTC will have a very advantageous position in this new system, now hyperinflation.
Bitcoin has no problems with storage
Investors in oil contracts were burning hands with paper, with no one to buy them, about to expire, and with overcrowded warehouses. As a consequence, pay to get rid of them.
It was practically inconceivable to think that short-term investors, who are only trying to profit from fluctuations before maturity, would have to be obliged to receive hundreds of thousands of barrels, no one had thought of this? Another failure of the system in which we live? Wasn’t oil an adult, stable and reliable asset?
Meanwhile, Bitcoin does not have any kind of risk similar to this, and it is even in a better position than Gold, if we consider the difficulties for physical delivery at the expiration of the contract.
From my point of view, Bitcoin is the one who has the best qualities as a refuge to face a situation like the current one, where it is more than clear that digital is much more useful.
Despite the fact that regulators classify cryptocurrencies as high-risk investments, so far this year BTC has fallen by only 3.8%; meanwhile, the S&P 500 has fallen 13%, and oil, why repeat it.
Oil prices in free fall. WTI at USD 0 per barrel. Here’s why
Bitcoin technical analysis
Bitcoin has kept consolidating in a range between USD 7,300 and USD 6,500, it seems that the real movement due to the crisis that we are experiencing has not yet seen it, the escape from the range could be explosive.
In an environment where risk is the least you want, it is quite clear that the search for liquidity and immediate refuge will be in the US dollar.
Within the range in which Bitcoin is trading, a lower peak can be observed, this being the main indication of a change in trend, but that is not confirmed until the immediate support is crossed, located at USD 6,500.
If we look to the left of the graph we can perceive the dominant force, after the strong bearish momentum seen in mid-March.
What we see today as a small bullish trend, could be nothing more than a deep pullback before a further dip. The BTC analysis gives more probability to this outcome, the zone of lows around USD 4,500 could be visited.
An exit from the range at the top will make way for new climbs in search of nearby resistance; The most important to watch are those located at USD 8,150, USD 9,130 and USD 10,300.
All our publications are informative, so they should not be accepted as investment advice under any circumstances.