Coronavirus Might Be Brutal For Bitcoin

Coronavirus has now seen a more rapid pace of transmission compared to the SARs outbreak. This is a serious development, one that will have important implications for the stock market and therefore for the cryptocurrency market. The near-term outlook of the stock market has been affected by all this and we have seen the S&P 500 (SPX) begin a downtrend. We know from the trading history of BTC/USD that every time we have seen a major downtrend in the stock market, the price of Bitcoin has followed and crashed as well. 

The daily chart for ETH/USD shows that the price is struggling to break past the 200-day moving average. It appears that the market may be close to beginning a downtrend in the near future. However, before that happens, we may continue to see misleading moves to trap in as many bulls as possible before the next major downtrend. The near-term outlook of Bitcoin dominance (BTC.D) threatens the rise of altcoins. We have seen many cryptocurrencies rally on recent developments as if they are profiting off uncertainty in the stock market. However, it is not likely to last for long and will have grave consequences for those that entered late and did not cash out. 

Throughout history, we have seen that during times of uncertainty, smart investors flock towards what they understand best. They are not likely to experiment with something so volatile and so unpredictable as Bitcoin during times of such uncertainty. If the Coronavirus ends up being as big as the plagues of 1720, 1820 or 1920, then 2020 may be a devastating year for financial markets in general and the cryptocurrency market in particular. It is also important to realize that the next downtrend in the cryptocurrency market would be a lot different than anything we have seen before. So far, on the weekly chart, we have seen higher highs and higher lows on longer time frames. This would be the first time for Bitcoin to form a peak lower than the previous peak.