Bitcoin continues to trade north of $6.5k and there is still a large number of retail bulls counting on a bullish breakout thinking BTC/USD might capitalize on the uncertainty in financial markets. They also base their thinking on how quantitative easing might affect the US Dollar and therefore Bitcoin. In my opinion, these past few weeks should make it absolutely clear to everyone that Bitcoin is not a standalone, uncorrelated asset. Movements in this market continue to be influenced for the most part by movements in the equities, commodities and forex markets.
Ethereum is at risk of a much more brutal decline. We have yet to see the pennants on both ETH/USD and BTC/USD break effectively. We could see them being broken sideways but we would still wait for a definitive move that shapes the direction of the market for the weeks and months to come. The Coronavirus situation is getting worse by the day and this is all that is on peoples’ mind at this time. Some investors are looking for opportunities to buy the dips in equities but I think it’s no different than catching falling knives as we do not know where the floor is. This next crisis could make the 2008-09 financial crisis look like a non-event.
The commodities market is also in trouble. Gold (XAU/USD) made a recent pump recently but the larger trend remains bearish. We can still expect further downside in gold, oil and silver in the days and weeks ahead. This will truly be the “everything bubble” as Ray Dalio says. In my opinion, the US Dollar would be one of the few beneficiaries even if it is short-term. The US Dollar may soon be digitalized and this would give the US Government and the Federal Reserve more control.
Some traders are hoping this would be bullish for Bitcoin but I disagree. Bitcoin was allowed to exist for a reason. They could have banned it early on but they didn’t. It appears that Bitcoin has finally achieved its purpose and has paved the way for mainstream adoption of a global digital currency. We do not know how long Bitcoin may be around for, but there is no denying that a lot of altcoins may not make it to the next cycle after what is about to come. This crisis would hit everything pretty hard and it would not be surprising to see the cryptocurrency market enter a long-term bear market.