The fluctuations in the cryptocurrency market have set the tone since the spread of the coronavirus. Bitcoin is put to test amid the first international crisis since it was created in 2009.
The COVID-19 pandemic came at a time when the trade, price and political “wars” in many countries were threatening the stability of the global economy. The spread of this disease has led to economic closings, air restrictions, paralyzed companies, and general quarantines, which make the rest of 2020 uncertain.
This situation is affecting all markets, including those of securities, raw materials, foreign fiat currencies, and even that of cryptocurrencies, where Bitcoin is at the top. Analysts consider the main cryptocurrency a risky asset that it is facing its first major international crisis.
Market analyst Alberto Cárdenas believes that this situation resulted from the current winds of recession and the significantly negative impact on the demand for products and services. This deflationary stage has caused cryptocurrencies not to perform well since their prices have been falling to reach support levels, an area of long-term purchase.
Regarding these support levels, the analyst considers that Bitcoin’s new floor could fluctuate between USD 3,600 and USD 4,300. Cárdenas had already said on March 10th that the price of Bitcoin could fall to around USD 5,000, which occurred two days later when it went from USD 7,508 to USD 4,184.
Factors Favoring Bitcoin
Despite these setbacks, Bitcoin’s price has recovered in the last few days and already exceeds USD 6,300, with rises that have reached 20%. It has recently maintained a bullish trend to decouple from the stock market.
Cárdenas said that, when central banks reduce their printing of money and generate more inflation, there will be a real impact on the economy. He considers that a loss of credibility in fiat money would allow a favorable wind regarding the inflation issue, which would favor the cryptocurrency market.
Bitcoin and World Situation
Spanish trader @inmortalcrypto, who refers to himself by this pseudonym, considers that the recent drop in Bitcoin’s prices during this global crisis was normal as all the economy was falling.
He explained that, although Bitcoin is not directly related to traditional exchanges, its drop is related to the world situation. In other words, in a bad global situation, people do not have enough money to afford to invest in a risky asset.
The cryptocurrency trader stated that people with financial problems, who are experiencing this crisis closely, will not invest in an asset that has recently dropped from USD 8,000 to USD 4,000 within a day. Undoubtedly, an economic situation in which people have a surplus of money favors Bitcoin’s growth and adoption.
According to @inmortalcrypto, fear has been the main trigger for the fall in Bitcoin’s prices, since people have learned from bad economic times that all assets suffer. He explains that an extension of the quarantine would lead to keep companies closed, which led Bitcoin to separate from the rest of the traditional markets and resume its long-term bullish trend.
In this regard, economist and bitcoiner Daniel Arráez said that there is currently a general fear that combines the spread of the coronavirus and the upcoming Bitcoin halving. He added that markets will remain erratic until the global situation improves.
By Willmen Blanco