Bitcoin Back in Range Trading After a Fakeout

KEY TAKEAWAYS

  • The price of Bitcoin sank along with the stock markets as new COVID-19 cases jumped.
  • ETHE continues buying tremendous amounts of ETH.

Dow Jones witnessed a record drop of 7% on June 11, the fourth largest daily drop this year. Some attempt to blame the second wave of coronavirus spread for the market downturn, while others hold the Fed’s bleak outlook on the U.S. economy liable. Bitcoin, strengthening its new-found correlation with the stock markets, fell from $10,000 to $8,900 alongside.

Daily new COVID-19 cases in the United States rose again to 23,300 on June 11, signaling the return of a second wave. California, Texas, and Florida report record new infections. Former FDA Commissioner, Scott Gottlieb, says that it is prudent for states and cities to slow down re-openings. If the trend continues, it will dampen market sentiment and slow down the rebound of equities and Bitcoins.

Source: U.S. CDC

The Fed recently expressed concerns about the US economy and announced that it would keep the benchmark rates close to zero until 2022. This perceived pessimism over the market prospect is a bad sign for risky assets in the short run. However, U.S stock markets staged a turnaround on Monday after the Fed launched the Main Street Lending Program to purchase US corporate bonds. Crypto market rebounded as well.  With the commitment to support the economy in trying times, the Fed’s balance sheet has expanded by more than 70% since February to reach USD 7.17 trillion, in an attempt to stimulate employment rate and maintain price stability. 

As long as the Fed reaffirms its stance on supporting the economy with extremely low interest rates and potentially abundant liquidity, the crypto market, which is primarily driven by global liquidity in the long run, is still promising.

Source: U.S. Federal Reserve

Before the slump, Bitcoin seemed to be on the verge of another break out. Yet, it eventually returns to range trading between $9,000 and $10,000. Please be reminded that the Mt. Gox rehabilitation plan is due on July 1. 141,600 Bitcoins held by Mt. Gox trustee may flood the market once settled. 

Recent data points to a lack of active buying interests in BTC. Conversely, the buying interest of ETH has remained particularly strong since April. GBTC, the most important marginal buyer of BTC has slowed down its intensive purchase, while ETHE revives its acquisition of ETH. This is a trend worth noticing: the release of Beacon Chain, which marks the beginning of Ethereum 2.0 upgrade, can trigger ETH price rally. 

Source: Grayscale, Bybit Insight

Source: Grayscale, Bybit Insight