The upcoming problems with banks, panic on the coronavirus and the Fed’s money printing are excellent opportunities for cryptocurrencies and blockchain projects and Bitcoin. Incredible events are taking place in the stock market. The fastest falling markets in history. The spread of coronavirus in the United States. The likely risk of falling consumer demand, lower consumption and, as a result, recession.
Analysis in such conditions becomes impossible, the position of traders is removed from the market. The Fed’s cash infusion is $ 1.5 trillion per month and the base rate is reduced, as a result, money is poured into the market in order to stop the market from falling, but this may not be enough.
In addition, a trade oil war was added to the coronavirus, and this could cause serious problems for US shale oil companies, whose production costs are $ 30-40. The US oil sector is sitting on a wild leverage, and as a result, banks that lend to them can start problems. Thus, is it possible to say that this is perhaps the best moment for cryptocurrency projects that can be competitive in comparison with the banking sector? Well, we still have to find out.
The fall of Bitcoin and the entire cryptocurrency market.
Bitcoin’s collapse on coronavirus was stronger than the stock market for several reasons. Well, firstly, the correlation between the S&P 500 index and Bitcoin reached 1. If earlier Bitcoin was associated as a protective asset and did not have a pronounced correlation, now all markets have started to fall during a mass panic. By the way, you can check the correlation of your crypto portfolio for free at Holderlab.io
The search for liquidity as the beginning of accelerating the fall of cryptocurrencies.
The reasons for the strong current decline in the cryptocurrency market may be due to the fact that stock market traders were looking for liquidity in order to maintain margin requirements. In this case, liquidity was sought in risky assets, those Bitcoins and cryptocurrencies, perhaps some traders went completely into the dollar. This is where the first wave of decline in the cryptocurrency market began.
Bitmex Margin Trading
The incoming wave from the reduction of positions in Bitcoin on coronavirus from stock market traders has demolished the position of margin traders on Bitmex. As a result, $ 500 million in long positions were liquidated in an hour. It remains to be seen how many were liquidated for other trading pairs.
As a result, we saw a drop up to $ 3800. A great lesson for those who trade with leverage.
Another curious fact is that cryptocurrency exchanges do not have mechanisms to stop trading. We saw that in the stock markets when there was a limit down on S&P500.
Trading Bitcoin Futures on CME
In anticipation of the elimination of margin positions on Bitmex and other crypto exchanges. Starting February 25, there was an active closing of long positions in Bitcoin futures. Opening short positions on the Chicago Mercantile Exchange. Which also influenced the fall of bitcoin as a whole. Cryptocurrency exchange margin traders have become a blast wave for the fall of Bitcoin on coronavirus.
Cryptocurrency trading strategy in a panic situation.
Already today cryptocurrencies are sold at a significant discount. Now we are forced to monitor the dynamics of the S & P500 index and the general news background. Which can affect the price of Bitcoin on coronavirus. However, in our opinion, the best moment for the Bitcoin HODL is probably coming. Today we see a good discount before the upcoming halving.
Do not expect the best price, it is almost impossible to catch. If it is possible to place pending orders this is good, today you can slowly buy current prices.
Trade managing your risks and do not rely only on luck.
Holderlab.io is a free service for automated crypto portfolio management with automatic rebalancing of assets (threshold or periodic), searching for efficient frontier and analysing assets using a correlation matrix and other crypto investments tools.
This article is not a recommendation for investment or investment in cryptocurrency, as well as perceived as investment advice. Be careful, because investing in cryptocurrencies is very risky and you need to consult with your financial advisor. Past earnings do not guarantee future earnings.