Bitcoin Weaker as US Stocks Fall after Trump’s Coronavirus Warning

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Bitcoin prices were trading lower heading into the New York afternoon session Wednesday, almost tailing the intraday sell-off in the US stock market.

The benchmark cryptocurrency plunged to a new intraday low at $6,160 around noon, shrinking its market capitalization by 3.54 percent. The move downhill closely followed Donald Trump’s press briefing on the worsening Coronavirus situation in the US, wherein he warned people to get prepared for “very, very painful two weeks.”

The US has the highest number of Coronavirus cases with more than 190,000 infections and around 800 dead. A task force set up by the White House believes the death tally could rise to anywhere between 100,000 and 240,000 over the next couple of months.

The grim picture has led investors and traders to move their capital out of risky assets. Bitcoin, which rose to fame as a safe-haven asset during stressful financial periods, failed to live up to its hype and fell alongside equities and even Gold, another globally perceived safe-haven asset.

Charles Edwards, veteran investor and head of a digital asset management firm Capriole, said investors are hunting for cash as Coronavirus pandemic spreads across the globe, noting that bitcoin could continue to head lower if the macroeconomic situation worsens.

“When there is extreme fear in the markets, people rush to safety (USD) and major markets move together,” Mr. Edwards said. “That is why we saw Bitcoin and Stocks fall in unison.”

Bitcoin Technical Outlook

Technically, bitcoin still has the potential to continue its uptrend as long as it stays above a set of crucial support levels.

It starts with the ascending trendline support, as shown in saffron in the chart below. Bitcoin so far has maintained an uptrend while testing this level and it could continue to head higher to retest resistance near $7,000.

bitcoin, btcusd, bitcoin price, coronavirus

BTC/USD inching lower | Source: TradingView.com, Coinbase

Meanwhile, breaking below the saffron line could land bitcoin to the pink horizontal support at $5,657, with $5,850-area acting as another support to bounce the prices back towards the north.

Conversely, the price can bounce back from the saffron trendline support and retest the descending saffron trendline as its short-term bull target. An extended move would also create a good opportunity to place a long position towards the $6,800-7,000 area.

The stressful times in the financial market make any trade – be it short or long – riskier than usual. Therefore, maintaining stop losses is recommended to minimize losses. Putting a long entry while placing a stop-loss strategy below the entry-level makes sense. Similarly, placing a similar position above the entry-level on a short trade would minimize the overall risks.

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