Bitcoin undergoes an intraday bounce after testing its long-term support.The recovery follows a deeper downside move earlier this week in the wake of the US oil market’s historic crash.President Donald Trump insists on saving the crude industry via another bailout.
Bitcoin rebounded higher Wednesday as the Donald Trump administration discussed the prospects of introducing yet another stimulus package.
The benchmark cryptocurrency advanced $254, or 3.75 percent, to establish a daily high near $6,985 on BitMEX. The intraday recovery also took place near a long-term support area near $6,400, suggesting that traders want to maintain their interim bullish bias ahead of Bitcoin’s supply rate cut this May.
Hyperinflation Excites Bitcoin Bulls
Part of the reason could be fears of hyperinflation. The price of benchmark West Texas Intermediate slipped below zero on Monday, reacting to the nosediving energy demand prompted by the Coronavirus-induced lockdowns and travel restrictions across the world.
Trump made a heroic effort on Tuesday to help the oil sector coming back to its feet. He asked his cabinet to inject cash into the industry to stop it from pursuing a historic collapse.
“We will never let the great U.S. Oil & Gas Industry down. I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!” Trump said on Twitter.
The announcement came atop the US Congress’ $2 trillion stimulus package to safeguard the economy, announced back in March. Bitcoin bulls perceived it as a sign of inflation, noting that it may leave a massive dent on people’s savings.
“The money printer goes BRRR, now bailing out oil and gas companies.” tweeted Gabor Gurbacs, the digital asset strategist/director at New York-based VanEck, alongside a Bitcoin hashtag. “Why should the average person pay taxes if we can just print money for [selected] companies?”
Pain Before Gain
Even as the fundamentals improved for Bitcoin, the cryptocurrency’s growing short-term correlation with equities continued to strangle its bullish bias.
Investment strategists at Glenmede wrote in a client note that US stocks could plunge back towards its yearly lows as corporate earnings dwindle and consumerism comes to a long halt amidst the Coronavirus scare. That is mainly a scary outlook for Bitcoin, which has tailed deeper dives and mild recoveries of the US equities since mid-March.
The stock markets are also important for Bitcoin now.
The strong correlation has not been denied for some time.
If the SP500 continues to slide, Bitcoin will probably follow.
there is a small chance that Bitcoin will decouple at some point, but so far I still don’t see it.
— silver bullet (@SilverBulletBTC) April 22, 2020
Even a technical perspective showcases a similar outcome for the cryptocurrency. It is trending inside a Rising Wedge, a bearing reversal indicator, that could topple its price to as low as $5,300, as covered earlier by NewsBTC.
Nevertheless, a renewed accumulation behavior at lower levels could see prices surge to as high as $9,000.
Photo by Darren Halstead on Unsplash