First Mover: Bitcoin falls as Covid rises, ECB’s Lagarde rises, US GDP reaches 33%

Bitcoin was lower for the second day, although traditional markets showed signs of stabilizing after Wednesday’s sell-off.

Cryptocurrency analysts have sought solace in bitcoin’s return since October, still at a staggering 22%, during a month when the Standard & Poor’s 500 index of US equities fell 2.7%.

“The sell-off of stocks and gold due to rising Covid infections and restrictive lockdowns has only had a limited impact on the digital asset,” Lennard Neo, head of research for the cryptocurrency-focused company, wrote in a report Thursday. Stack Funds.

In traditional markets, European equities rose as traders awaited a decision from the European Central Bank, led by President Christine Lagarde, on the need for further monetary support amid a resurgence of coronavirus cases.

US stock futures indicated an open to the upside, as a key government report showed the world’s largest economy grew 33% in the third quarter – a somewhat contextless data point that will likely do little beyond serve as a simple talking point President Donald Trump’s re-election campaign.

Just as bitcoin bulls were starting to drool over the cryptocurrency’s powerful rally over the past week to $ 14,000, a sell-off in traditional markets has dragged prices lower.

Investors around the world have been baffled by reports of a resurgence in coronavirus cases. German Chancellor Angela Merkel announced that the country would implement strict new trade restrictions and French President Emmanuel Macron announced plans to impose a national blockade.

Such restrictions could hold back economic growth, theoretically a deflationary development, which could reduce the demand for bitcoin in the short term as a hedge against rising consumer prices. There is also the possibility that some investors, seeing further turmoil ahead, have decided to increase liquidity. One of the easiest things to sell is bitcoin, which is still up 84% year to date, even after selling on Wednesday.

“It looks like the pressure was too much,” Mati Greenspan, founder of foreign exchange and cryptocurrency research firm Quantum Economics, told clients.

As detailed in Wednesday’s First Mover, analysts relying on price chart patterns identified few points of resistance along bitcoin’s path from the psychological level of $ 14,000 hitherto rarely breached to the all-time high of $ 20,000, reached. in 2017.

According to Greenspan, “$ 14,000 is a huge psychological barrier and I would be happily stunned if we were able to get through it without first seeing a significant withdrawal.”

And as CoinDesk’s Omkar Godbole reported Thursday, bitcoin options traders are assigning a low probability that the cryptocurrency will end above $ 20,000 in 2020.

According to cryptocurrency data firm Skew, the implied chances of prices above that level currently stand at around 6%.

“A less than 10% chance of record highs by the end of the year means the market is not worried about this result,” Vishal Shah, an options trader and founder of Alpha5, told Godbole in a Telegram chat. derivatives exchange supported by Polychain Capital.

Despite the most sincere wishes of the bitcoin bulls, it would take a rally of over 60% over the next eight weeks for prices to set a new record. It wouldn’t be unprecedented – there have been eight times in the 11-year cryptocurrency’s recorded history where prices have risen by more than 50% or more in a span of two months.

It could be that the traders are just being realistic.

“The options market appears not to be carried away by the recent strong price momentum,” said Sui Chung, CEO of CF Benchmarks, in a statement to CoinDesk. “If we extrapolate bitcoin’s price action and volatility from the past 90 days to the December deadline, bitcoin looks set to end the year between $ 14,000 and $ 15,000.”

Read more: Bitcoin’s options market only sees a 6% chance of $ 20,000 before the end of the year

Bitcoin’s price rally has come to a halt, with the highest cryptocurrency by market value near $ 13,100, after reaching 16-month highs above $ 13,800 during Wednesday’s Asian trading hours.

Investors are shifting money from equities to safe havens like the US dollar and treasury bonds, worried that the new lockdown restrictions by Germany and France would silence the eurozone’s fragile economic recovery.

Not just bitcoin, but nearly all US dollar-denominated assets have taken a hit in the last 24 hours or so. Markets saw similar but more violent action in March as recession fears sparked a global liquidity rush.

If the virus figures continue to rise, risk aversion is likely to intensify, fueling a deeper drop in the cryptocurrency. However, it is possible that investors could buy the dips, with increasing institutional adoption increasing the long-term prospects of the cryptocurrency.

Additionally, equity markets are likely to stabilize, helping bitcoin regain balance if the ECB announces more monetary stimulus later on Thursday. While the central bank is expected to maintain the status quo, it could lay the groundwork for further stimulus in December. Earlier this month, Goldman Sachs said the central bank could increase its pandemic bond purchase program by 400 billion euros ($ 470 billion) in December to counter deflationary pressures.

From a technical analysis perspective, the immediate bias will remain bullish as long as prices sustain above $ 12,500. On the higher side, the June 2019 high of $ 13,880 is the level to beat for the bulls.

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