Crypto markets haven’t recovered much from the violent sell-off we saw earlier this week. The world’s leading cryptocurrency lost more than 50% of its value in less than two days.
During this extreme sell-off, bitcoin’s price fell to $3,850, a level we last saw in March 2019. On derivatives exchange BitMEX, the price of BTC went further low to $3,600. So, does this mean, BItcoin has found its bottom and the only way is up from here?
According to trader Cantering Clark that isn’t the case because equities are going to see a lot more pain meaning bitcoin will too.
“Bitcoin has not bottomed because equities have not bottomed,” said Clark.
For the past month, crypto markets haven’t been faring well along with stocks, bonds, gold, and other assets amidst the concern about the economic impact of the coronavirus (Covid-19), now declared pandemic by WHO.
The US stock market enjoyed considerable gains after having its worst day since 1987 following the central bank pumping billions into the market. This led the gold recording its highest weekly fall since 2012 which is no different from what the yellow metal saw during the 2008 financial crisis.
But these gains don’t mean equities have bottomed because Clark says, “We essentially just went from Bull market to Bear market in under 20 days.” As we have been seeing, Italy, Spain, and the USA have closed down its border to keep the coronavirus from spreading and the full extent of the effect and damage from the virus is far from being revealed at this point.
“This began as an exogenous event and turned into something that now permeates the largest & most fundamentally important industries in the global economy. The financial industry, the travel industry, the oil industry,.. Everrrryttthinnggg,” Clark said.
Bitcoin price also jumped about 35% after crashing to $3,850 but that has been without help from the governments.
The analyst says “Bitcoin will be free to put in whatever positive price action it can when the major markets idle,” but “the moment equities shit the bed again Bitcoin will follow.”
Some traders, however, believe bitcoin has found its bottom and we would range now. In the short-term bitcoin is expected to test the $6,200-$6,400 region. But the market is still skeptical of seeing any potential gains yet.
Economist and trader Alex Kruger said the spike in price after BitMEX is done with its liquidations won’t continue for much longer time-wise. It’s all a short-term play for now. The flagship cryptocurrency could revisit $4,500, where we will get to know if $3,850 was indeed the bottom or not.
“A counter-thesis is that once Bitmex is done with liquidations and funding goes back up, it will again become attractive to short. That may not be very relevant though, as credit risk has now become a real issue and not as many traders want to keep funds at exchanges,” said Kruger.
Overall, the market believes this crash has shaken the weak hands out and bitcoin will only emerge stronger.
“Bitcoin was born in 2008, during the winter of our financial discontent. It has already weathered much to be here, and it seems unlikely to give up anytime soon. It will emerge from this current calamity stronger than ever. Decades are not measured in days,” said Tyler Winklevoss, co-founder and CEO of cryptocurrency exchange Gemini.