The next dump is already in the starting blocks after Bitcoin surprisingly rose significantly on March 19, 2020 by more than $ 1000. Sentiment is following the stock market, but the stock market is expected to keep falling and Bitcoin will most likely follow the move. So is the outbreak just a fake breakout?
Further decline in prices on the DAX
As we reported earlier, there seems to be a strong correlation between the equity markets and Bitcoin. Logically, it can be explained by the fact that investors take over the mood on the stock market and emulate it in the cryptocurrencies. After all, in the eyes of most investors, cryptocurrencies are significantly more risky than traditional investments. Accordingly, you orientate yourself on the classic market.
The correlation between Bitcoin and the DAX, for example, as a representative of the stock market, seems to be high. However, Bitcoin price broke from this correlation on March 19 and saw an increase of more than 20%, while the Dax rose by a single-digit percentage range.
However, that the DAX will continue to fall from next week is a self-fulfilling prophecy. Experts estimate that the floor of the DAX will reach around 7500 points. After a slight upswing, the value is currently just under 9000 points.
The expiration date for the DAX is set
As Christian Zoller (chart technology expert) rightly suggests, the upturn in the DAX, particularly today, March 20, 20, is due to the fact that the DAX futures have expired today. This means that investors try to manipulate the price in their favor in order to avoid losses. Even with such a large index, manipulation is possible, because behind DAX futures are large institutional players with a lot of effort. It is conceivable that today’s positive impetus will also have a positive effect in the sense of a domini effect over the next few days, but prices are expected to fall by the beginning of April at the latest. The expert estimates the probability of such a course to be 60%.
If investors base their risky investments on the stock market, it could mean that Bitcoin is expecting the same thing.
The opposite probability: Bitcoin becomes a “safe haven”
Contrary to the thesis, investors may now see Bitcoin as a safe haven. A lot of new money has been printed in the past few days. In the face of the Corona crisis, the countries decided to support the economy with enormous amounts of fresh money. As soon as people become aware of how much new money has actually been launched onto the market, they could realize that Bitcoin could be a sensible investment. After all, Bitcoin is deflationary and tries to assert itself as digital gold and as a payment method.
But how realistic is that? In our opinion, the idea is currently not realistic. Bitcoin as a secure asset class in times of the corona crisis is currently unimaginable. However, right after the time of the crisis, the time for Bitcoin could come.
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