- The financial markets remain a treacherous place for now.
- Bitcoin has yet to demonstrate its real purpose.
- The technical picture implies further decrease within a wide range.
Bitcoin is about to finish the second positive week in a row. The first digital coin has recovered from $5,680 and came close to psychological $7,000 during the week. Bitcoin's market capitalization has reached $12.3 billion. which is 65.2% of the total cryptocurrency market. Its average daily trading volumes reduced to $36 billion from over $50 billion at the end of the previous week.
What's going on on the markets
As the deadly coronavirus is spreading around the globe, claiming more lives every day, the countries are forced to introduce blanket quarantine policies and urge citizens to stay at home. Major economies are slowly grinding to a halt, while economic indicators suggest that the global recession is inevitable.
However, the global financial markets managed to regain some ground during the week as massive stimulus measures announced by FED, Bank of Japan, ECB and other regulators helped to calm down the panic and allow investors and traders some breathing space. US stock market registered the third day of growth. S&P 500 headed to the best three-day gain in near nine decades; however, experts warn that the recovery may be nothing more than just a dead cat bounce before another fierce sell-off and race to the bottom.
The number of initial jobless claims exceeded 3 million during the week ending in March as compared to 281,000 during the previous period, according to the report published by the US Labor Department on Thursday, March 26. Moreover, the real numbers may be even higher as the system that accepts the applications went down due to overload. Many people failed to submit applications, but they will keep trying. The figures are scary as they reflect the dire situation of businesses and citizens and put additional pressure on the social welfare system.
Nevertheless, the stock indices moved higher amid expectations of a new package of stimulus that was approved by the Senate on Thursday. The House of Representatives will vote on the package later today. It contains stimulative measures to the tune of $2 trillion and implies direct financial help to all citizens. The Americans will receive a lump sum of $1200 to their deposit accounts.
Bitcoin at crossroads
Bitcoin is in a predicament. The digital coin was created in 2008 as a response to banks' bail-outs and irresponsible monetary policies. The first cryptocurrency has yet to prove its safe-haven status touted by cryptocurrency enthusiasts. This identity crisis hurts the industry and erodes trust in the cryptocurrencies. A veteran trader and a prominent figure in the financial world Peter Brandt warned that Bitcoin should solve its identity crisis. He believes that Bitcoin does not have much time to demonstrate its true purpose.
However, numerous prominent figures of the cryptocurrency industry, firmly believe that Bitcoin is a perfect investment opportunity at this stage as it is about to skyrocket later this year. The main reasoning behind this statement is that people will use Bitcoin as a hedge against inflationary measures taken by governments and monetary authorities to mitigate the financial and economical consequences of COVID-19. Thus, the CEO of Galaxy Digital, Mike Novogratz mentioned the economic crisis triggered by coronavirus as an opportunity for Bitcoin to declare itself. Similar views aired the head of the world's largest cryptocurrency exchange Binance and the CEO of Pantera Capital.
While those forecasts may be valid in the long run, a highly volatile environment and unseen level of uncertainty make both financial and digital markets very unpredictable at this stage. It means that we may see another major sell-off before the real recovery starts. Meanwhile, European cryptocurrency trading services providers note a record growth of trading activity. Thus, FXStreet reported that the trading volumes on Spanish platform 2gether jumped by 236% in a matter of days.
BTC/UD: Technical picture
From the long-term point of view, BTC/USD is moving in a channel limited by SMA200 weekly on the downside (currently at $5,574) and SMA100 weekly at $7,133. A sustainable breakthrough in either direction is needed to clarify the technical situation.
Above, the critical resistance is created by psychological $8,000, which is closely followed by $8,250. A confluence of SMA100, SMA50 and SMA200 daily make this area a hard nut to crack for Bitcoin bulls. Also, this area slowed down the sell-off earlier this month. Once it gives way, the upside momentum will gain traction with the next focus on $9,300 (38.2% Fibo retracement for the downside move from July 2019 high to December 2019 low.)
BTC/USD weekly chart
However, the RSI on the daily chart starter reversing to the downside, which means the bearish scenario should not be excluded. On the downside, the key support is created by the above-mentioned SMA200 weekly; However, there are several important levels that may serve as a backstop for Bitcoin.
If the price moves below $6,300, BTC/USD may enter another consolidation phase with a bearish bias towards the next support at $6,000. This psychological level is the last barrier that separates BTC from a deeper decline to $5,550 (SMA200 weekly) and $5,000. A sustainable move below this area will open up the way to the lowest level of the previous week at $4,437.
The Forecast Poll showed a mixed picture as experts provided different views on the situation. While the long-term bias remains bullish, the expectations on a weekly and monthly basis stayed mostly neutral. Notably, weekly price expectations exceeded $10,000, and stayed below $7,000 on monthly and quarterly time frames.
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