What Could Drive Bitcoin Price Back to $5K?
Bitcoin has experienced some wild fluctuations again on Monday. Initially, it surged to a daily peak at $5,823 but then shed almost $1,000 to a daily low $4,857. What can bring the crypto back to a support level of $5,000?
Trading Below $5k is New Norm
Last Thursday, Bitcoin couldn’t resist the COVID 19-induced panic that crashed stock markets and broke below the $5,000 level for the first time since April 2019. On Friday things got even worse, as the oldest cryptocurrency broke below $4,000 on several major exchanges.
Over the weekend, the crypto market was in wait-and-see mode in the hope that the coronavirus pandemic would slow down, or at least the world governments and central bankers would come out with stimulus packages effective enough to curb the impact.
It seems that the crypto space is now interconnected with traditional markets more than ever. One would expect that Bitcoin should act as a safe-haven and get pumped by those who rush to secure their savings from market turmoil. However, the general panic seems to have hit investors’ appetite for cryptocurrencies as well.
Initially, Bitcoin price surged to over $5,800 (on some exchanges, it traded above $5,900) on the news that the US Fed cut its interest rate to zero in an emergency move and launched a massive $700 billion quantitative easing program.
The crypto community hoped that pumping cash into the markets would help the global economy at least temporarily, but it is not the case for now. The stock markets reacted negatively and Bitcoin crashed below $5,000 again. Investors are worried that the central bank’s action might not be enough.
Seema Shah, chief strategist at Principal Global Investors, told Financial Times:
The Fed has thrown everything at this. If we are now facing the end of central bank action, it means we are on our own. There is a fear settling in the market, investors are terrified that this was all that was left.
What Can Help Bitcoin Consolidate Above $5,000?
Confidence. As soon as the coronavirus persists expanding globally, the macroeconomic figures will be negative, and the stock markets will test new support levels. That won’t bode well for Bitcoin either.
Unfortunately, the outbreak only starts in Europe and the US, and we should hope that governments will efficiently fight the spread as China did. We should hope that the warm weather of the summer season will have a positive impact, though experts are not sure about this.
Crypto investors wait for positive news before pumping the prices again.
Do you think Bitcoin’s recent decline below $,5000 is only temporary? Share your thoughts in the comments section!
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