US WTI crude oil futures contracts for next June fell by more than 43%. As the price of oil plummeted, Bitcoin remained in its current trading range.
Oil futures dropped in the past few days, showing negative prices for the first time in history. Since then, the cryptocurrency ecosystem has been enjoying the fact that Bitcoin suddenly seems to have become a relatively stable asset.
Markets were shocked when West Texas Intermediate (WTI) crude oil futures contracts plummeted last April 20th. The measures against the coronavirus pandemic caused fears of oversupply, which affected even the main oil benchmark for the USA.
One day later, crude oil futures contracts for next June fell more than 43% to the lowest point in 21 years, that is, USD 11.57 per barrel. In contrast, Bitcoin barely faltered and maintained its recent trading range of between USD 6,400 and USD 7,400.
The first cryptocurrency has performed better than oil for much more than two days regarding price stability, according to data from CryptoCompare. The non-renewable resource first began to show greater volatility in early March, which has remained largely higher in April.
CryptoCompare recently showed in a graph the volatility of oil, Bitcoin, gold, and the S&P 500 between April 10th and April 24th. Volatility above 5% in 14 days translates into 25% or more on an annual basis. “The more volatile, the greater the percentage move, and the riskier the asset, regardless of the direction,” the company said through an e-mail message.
While Bitcoin was the “riskiest” (or most volatile) asset of the four participants at the beginning of the year, oil rose to levels above 0.10 in early March and even as high as 0.15 at the end of the month.
The disagreement between OPEC and Russia, along with the impact of negative demand as the year progressed, caused oil prices to drop. This situation made this commodity riskier than Bitcoin, according to James Li, an analyst at CryptoCompare.
The growth in the volatility of Bitcoin, which came soon after, is probably related to the “Black Thursday” crash that occurred on March 12th. The latter event saw the cryptocurrency plummet to as low as USD 3,867, at the same time that all the markets suffered the consequences of the coronavirus quarantine.
Since then, both assets have seen a drop in volatility, but the swings in the price of oil do not seem to have come to an end yet.
If there is no significant catalyst for the demand, it will be impossible to find a place to put oil, according to Daniel Masters, president of CoinMetrics, the UK-based asset management company. Masters believes that continued problems with the oil futures market could be on the horizon, due to the shortage of facilities for oil. He said that the worst is not over yet since the contracts for next May were recently rolled over to the contracts for June, and when the contracts for June expire, there will be a “total massacre”.
By Willmen Blanco