Oil Oversupply Fears Might Hurt Bitcoin’s Prospects In 2020

Oil Oversupply Fears Might Hurt Bitcoin’s Prospects In 2020

Bitcoin (BTC) is ready to make its next big move but it cannot do that on its own. Near term, we have seen the price rise well above $8k and it might even end up testing $9k. However, this is hardly of any consequence because the actual direction that BTC/USD will take depends on the direction of the commodities market in general and that of oil in particular. Oil oversupply fears in 2020 could seriously hinder Bitcoin’s prospects. A rise in US-Iran tensions recently sent the price of oil soaring and BTC/USD followed. However, now that those tensions have simmered down and we know that neither of the two countries are looking for war, it might be time to think about what could happen if we actually see an oil oversupply this year. 

The weekly chart for West Texas Intermediate Crude Oil (USOIL) shows that oil is now trading at a critical juncture. It will soon have to make a major decision. The last time it made such a big decision was in 2014. The year sounds familiar, right? Of course, it does. That was the year BTC/USD capitulated and crashed below the 200-week moving average following the footsteps of WTI Crude Oil (USOIL). There are a number of reasons we could see it happen again in 2020. For a long time, major OPEC countries have been oversupplying to choke frackers. That’s right; they want them to give up. So, they keep the prices low so most of the shale fracking companies would starve and stop. This has worked for a while but the US under the presidency of Donald Trump seems more determined to focus on more production. 

The tug of war between the US shale industry and OPEC reminds me of how Rockefeller starved his competition and put most of them out of business with cut throat prices, even operating at a loss at times just to push everyone out. This race for global hegemony in the oil industry could lead to oversupply in 2020 and we might see a 2014 styled crash in the price of oil once again which would be extremely devastating for Bitcoin (BTC). 

The daily chart for BTC/USD shows that Bitcoin (BTC) has already run its course and reached the top of the rising wedge that it has been trading in. It now risks a decline below this rising wedge in the near future. It is still possible that we might see a retest of the 200-day moving average before another downtrend. We saw the same happen last time after which a major decline followed. This time, that decline could be far more devastating and BTC/USD might end up doing something that no one is expecting just when everyone and their dog is busy buying in anticipation of a pre-halving rally. 

 

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