Bitcoin gave up its overnight gains to follow the global markets on their downside spree this Monday.
The benchmark cryptocurrency tanked to establish a fresh intraday low at $4,773 on US-based Coinbase exchange. The downside move appeared after bitcoin registered an overnight price rally towards $6,000, prompting traders to take short-term profits in what appears to be a prevailingly aggressive, bearish market.
Bitcoin’s gains last night came in response to the Federal Reserve’s fresh stimulus package. The US central bank announced Sunday evening that it is cutting the benchmark interest rates to near-zero in its latest bid to prevent a more serious economic slowdown caused by the Coronavirus pandemic.
BREAKING:The Fed cut its benchmark rate by a full percentage point to near zero and will boost its bond holdings by $700 billion to cushion the economy from the coronavirus outbreak https://t.co/3t8qmOxbda
— Bloomberg (@business) March 15, 2020
Despite the Fed’s upside policy, the global market fell following Monday’s opening bell. In Asia-Pacific, Australia’s SPX/ASX 200 index dived by 8.66 percent while China’s Shanghai Composite Index plunged 3.40 percent and Hong Kong’s dipped by 4.33 percent.
Meanwhile, European stocks opened Monday in a negative zone as well, with its STOXX 600 index crashing by more than 10 percent as of 0922 UTC. In the US, futures linked to the Dow Jones Industrial Average dipped by 1,000 points. There are more than 3,000 cases of Coronavirus in the US, according to official data.
Spot gold jumped to $1,550 an ounce shortly after the Fed’s rate cut announcement but fell as the Asia session matured. Reports from Hong Kong indicated that traders – and even everyday citizens – rushed to open markets to sell Gold at its new high. That somewhat explained why bitcoin gave up its rate cut gains.
Investors tend to park their capital into safe-havens in times of global crisis. Both Gold and Bitcoin have failed to offer any kind of safety to investors against the rising Coronavirus pandemic. Part of the reason is people’s tendency to hold fiat when they self-quarantine themselves in their homes. That reduces the demand for illiquid assets, even if they tend to offer safety nets.
But Steven Dunn believes that investors will move back to safe-havens when the dust settles. The head of ETFs at Aberdeen Standard Investments told Kitco that the ongoing liquidity crisis could boost demand for Gold, at least.
“Central banks are going to continue to lower interest rates and step up their quantitative easing measures,” he said. “Gold will bounce back once investors see all this money being printed. The debt situation is only going to get worse and that will depreciate fiat currencies.”
Hope for Bitcoin
A similar sentiment engulfs bitcoin traders that see the cryptocurrency recovering once the Coronavirus pandemic hits an end. Sathvik Vishwanathan, the co-founder & CEO of India-based Unocoin exchange, reiterated Mr. Dunn’s point of view of a safe-haven rebound, saying:
“Many central banks are pumping in fiat liquidity into the system through banks. There is a reason for bitcointo exist. If bitcoin was not fixing anything, it would not have reached so far.”