As the world continues to reel from the Coronavirus outbreak and travel becomes increasingly restricted, crypto asset markets have begun to recover somewhat. Bitcoin has reclaimed $6k but what has caused the return of confidence and will it last?
Over $25 billion has returned to crypto markets over the past 24 hours or so as total market capitalization headed back towards $180 billion.
From their dip late last week digital asset markets have recovered almost 30% to current levels but things are not all rosy just yet.
Since the beginning of 2020 cryptocurrencies have wiped out all of their gains in one quick plunge last week as global markets and commodities took a beating.
Bitcoin bounces back to $6k
Bitcoin has been leading the pack again as it cranked a thousand dollars to top out at $6,300 in late trading yesterday. Since then BTC has pulled back to the $6k area where it has found support.
Analysts have been looking at the weekly chart for signs of the next direction however in the present tumultuous times it is likely to be flat for a while or to the downside.
$BTC Weekly Chart.
— CryptoFibonacci (@CryptoFib) March 19, 2020
The analyst added that a retest of $3,900 would not surprise him as it takes time for a bottom to form.
What we may be seeing then is a similar market move to the capitulation in 2018 when BTC dropped from $6k down to just above $3k, remaining there for a couple of months.
Stock markets continue to get battered as S&P500 fell further this week to close at just over 2400 yesterday.
Over the past 30 day period, the index has lost almost 30% with the Dow Jones dropping 32% over the same period.
Gold prices hit a three month low this week and they have yet to recover so at the moment crypto assets are uncorrelated.
Are there any fundamentals?
Aside from the Bitcoin halving, there appear to be no crypto-specific fundamentals driving the recent rally.
The market is very small in comparison to traditional stocks and commodities so the move is likely to have been driven by day traders or a few whales pumping prices.
It could also be the case that Bitcoin has just ‘reset’ itself falling to ‘fair value’ with all of the recent liquidations and found a level of support that reflects market conditions.
Unlike traditional financial systems, there are no bank bailouts for crypto, no circuit breakers to prevent further losses, and no fiscal stimulus measures.