Bitcoin price fell 4.30 percent as US oil futures slipped below zero for the first time. Has the crash deterred bulls from the market?
April 21, 2020 | AtoZ Markets – The current crisis, largely induced by the unexpected spread of the novel coronavirus (COVID-19), took its toll on oil prices. For the first time in history, crude oil trades below zero, meaning that producers are paying the buyers for disposing of their supplies. While this is undoubtedly an event to be remembered, it’s unlikely that this will have a severe impact on Bitcoin’s price.
Crude oil prices plummet below $0
Benchmark US crude oil prices sank to below $0 on Monday for the first time in history. Essentially, this means that oil producers or traders have to pay other market participants to take the oil off their hands. The West Texas Intermediate crude (WTI) futures expiring in May plunged to negative $37.63 yesterday.
The reasons for that are undoubtedly found in the consequences of the COVID-19 pandemic. Almost all countries halted their international flights. A lot of countries also restricted internal land travel between different cities. This was done in an attempt to slow down the spread of the novel coronavirus that continues to take thousands of victims every day. Land-based and air travel industries are among the greatest consumers of petrol-based products, hence the significantly reduced demand.
As such, the oil industry is currently in a state of oversupply, and this causes storage tanks to become so full that it’s challenging and costly to find physical space to store it.
Will Bitcoin price drop if oil continues the downtrend?
The never seen before Crude oil prices have left not only the Financial markets but also several economies aghast. Bitcoin ended its ‘Bull run’ on Monday, as it fell below the $7k mark. BTC dropped even further today. The day’s range for Bitcoin is $6,774.48 — $6,922.31.
However, demand for Crude is indeed decades low. Coronavirus has caused the world to reach a stage that the world has not yet observed ever. It appears that Bitcoin lost its Bull run and fell with the Crude.
However, it is essential to understand that Crude oil has numerous commercial usage. Thus, real demand and real supply are at stake here. But, in the case of Bitcoin, commercial usage is almost negligible. No industry depends on Bitcoin for day-to-day functioning. Therefore, the recent decline of the BTCUSD has more to do with investor panic than with crude oil.
Therefore, there no reason to panic for Bitcoin investors. BTCUSD might fall further, but that will only be due to heavy selling and not directly correlated to crude oil. Considering the current macroeconomic conditions and the high volatility is imperative that investors do not go for unnecessarily risky trades.
Bitcoin price technical outlook
Here is the four-hour timeframe chart for Bitcoin.
- The large red candles indicate the panic and profit-booking mostly by the retail investors. The large volumes associated with those red candles are also a gloomy sight for BTC investors.
- The crucial support is at $6,793.06. BTCUSD is currently hovering very close to this support. Falling below this support, BTC could drop to $6,568.
- The Relative Strength Index does not seem to provide any relief either. It is more likely that a further drop in BTCUSD might take place soon. The Moving Average indicators point to a ‘strong sell’ in the short term.