Bitcoin Market Update: BTC/USD paralyzed by the US-China conflict escalation

The China-US conflict is heating and threatening to derail the rally on the global stock markets. The US President Donald Trump dashed hopes for “Phase 2” trade negotiations with China by accusing Beijing of spreading coronavirus and causing a global pandemic.

We made a great trade deal. But as soon as the deal was done, the ink wasn’t even dry, and they hit us with the plague, he said, as cited by Reuters. 

While the stock market reaction has been muted so far, further signs of the conflict escalation might pull the rug from under the risk asset markets. Once this happens Bitcoin won't be left unaffected due to an increased correlation between the digital asset and the US stocks,  which is especially strong on the way down. Moreover, the prolonged period of range-bound trading increases the risks of exaggerated moves and spikes of volatility.  

However, currently, the market is supported by the vaccine news that brought optimism to financial markets and diverts the attention of the China-US issues.  

The vaccine news is clearly a positive development. But it’s still a long way off. The fear of the W-shaped recovery is probably very high at the moment. Good news is that markets still have a chance to ride it out because the Fed has bought time, so financial conditions can stay easy until growth kicks in, Mark Nash, head of global fixed income at Merian Global Investors commented as cited by Bloomberg. 

BTC/USD: Technical picture

Contradictory fundamental factors keep BTC/USD locked in a tight range. The coin has been moving around $9,200 since the start of the week with little progress so far. Low volatility and decreasing trading volumes leave no hope for the bulls and keep bears in check at the same time.  

On the intraday charts, BTC/USD recovery is limited by a confluence of 1-hour SMA50, SMA100 and the middle line of the 1-hour Bollinger Band at $9,250. Once this barrier is cleared, the upside momentum may be extended towards $9,345 (July 12 high).

The local support for BTC/USD is created by the lower line of the 1-hour Bollinger Band on approach to $9,200. If it is broken, the sell-off may be extended towards $9,104 (the lowest level of July 14) and psychological $9,000.

BTC/USD 1-hour chart