- Bitcoin starts correcting lower a day after hitting the local top near $7,81k
- The move downhill occurs alongside a similar price action in Gold markets.
- The yellow metal weakened towards $1,700 an ounce as some US states moved towards reopening economies.
Bitcoin showed first signs of withdrawing from its ongoing upsurge as its price slipped 1.50 percent a day after establishing the local top near $7,810.
The bitcoin-to-dollar exchange rate bottomed intraday at $7,677 during early Asian trade Tuesday, hinting it would extend its bearish correction to target technical support levels between $7,300-$7,500. The pair eased after US stocks hit a new seven-week high as states, including Florida, moved towards reopening their economies.
Florida has flattened the curve. Our state continues to ramp up #COVID19 testing, our hospitalizations remain low, and we are on the right path to safely re-opening our economy. pic.twitter.com/hsihPWhHyF
— Ron DeSantis (@GovRonDeSantis) April 27, 2020
The intraday action also showed the first signs of a correlation-break between Bitcoin and US equities. The two have moved almost in sync since March 2020, with bitcoin assuming the role of a risk-on asset amidst the Coronavirus-led economic crisis. The cryptocurrency saw some pressure from robustness in stocks this Tuesday.
Gold Down like Bitcoin
As it hinted to break its short-term correlation with US equities, Bitcoin reinstated one with Gold, its top safe-haven rival. The cryptocurrency’s intraday correction followed similar moves in the yellow metal market.
The XAU-to-dollar exchange rate fell 1 percent to close below $1,700 an ounce, logging its third consecutive day in the red zone. Before, the pair was trading near its highest in more than seven years. But the signs of easing Coronavirus lockdown took a toll on its price rally.
The global factors could put Gold and Bitcoin in the same basket. As economies begin to reopen, investors could allocate part of their funds to risk-on equities, affecting the growth of commodity assets. While that would not stop the Gold and Bitcoin’s uptrend, it could end up slowing the bullish moves due to sudden capital reallocation.
“In this tumultuous year, Bitcoin is gaining accolades as a stabilizing and maturing store of value, more likely to continue appreciating along with gold,” noted Mike McGlone, senior commodity strategist at Bloomberg Intelligence. “Bitcoin volatility is lower than the world’s most significant commodity, crude oil, and the lowest ever vs. the S&P 500.”
Avtar Sandu of broker Phillip Futures Pte. said something similar about Gold. The senior manager for commodities told Bloomberg that while Coronavirus certainly destroys the yellow metal demand, volatility in financial markets could send investors to its safety.
“Precious metals, especially gold, remain a good hedge,” he added.
For now, investors could use Bitcoin to withdraw near-term cash profits.
The cryptocurrency is sitting atop 100 percent gains after crashing to $3,800 in, and its upcoming halving next month promises to send its prices further up towards $8,000. Nevertheless, a drop in US equities could lead investors to liquidate their profitable positions in both Bitcoin and Gold markets to cover their losses elsewhere.
While that additionally makes the two assets more correlated, it also means that they both could undergo sustained downside corrections in sync.