The sharp drop in Bitcoin below $ 8,000 has accelerated speculation on a prolonged downward movement. But cryptocurrency hides a bullish catalyst under its sleeves.
It therefore seems that the CME futures contracts linked to the price of bitcoin formed a large spread on its daily chart. The missing candle between Friday closing and Monday opening is approximately $ 875 tall, with its head pointing to nearly $ 9,060. In traditional terms, the spread could encourage Bitcoin to rebound during the next session, keeping the bullish bias of traders intact.
The analyst perceives trading spreads in the Bitcoin futures market as a leading indicator to predict the next trend. 95 times out of 100, the spot price of bitcoin intends to evolve in the direction of future gaps to fill them. This makes it a signal precise enough to spot short-term trading opportunities in the bitcoin market.
The problems for Bitcoin remain
Bitcoin could nevertheless plunge further. This is partly due to the worsening sentiment in the world market led by the oil price war between Russia and Saudi Arabia, as well as the economic crisis caused by the growing number of cases of coronavirus outside of China, mainly in the United States and Italy.
A supply-driven decline in oil prices would normally be positive for global growth, reducing costs for businesses and putting more money in the pockets of consumers.
This time, it might not be the case https://t.co/VVmIALqwP7
– Bloomberg (@business) March 9, 2020
So it seems that the latest cryptocurrency crash below the $ 8,000 level corresponded to stages similar to those of global stocks. The three US indices, for example, plunged into bearish territory after the New York morning bell on Monday. Their downward movement has sent investors to the security of low-risk government bonds.
Peter Cecchini, chief market strategist at Cantor Fitzgerald, called it the end of the 11-year bull market.
Some analysts believe that bitcoin could rise against a financial market collapse, arguing that it is a safe haven alternative. But its latest downward trend has shown that investors are more interested in storing liquidity or deleveraging their positions in equity derivatives.
According to Travis Kling, founder of the Ikigai Fund, bitcoin can be maintained as a store of value in the long term. The former portfolio manager quoted increasingly radical monetary and fiscal policies that could make fiat money and its derivatives like government bonds weaker.
“All of this is now likely in the short term,” he added. “Bitcoin is a non-sovereign, fixed capital supply, a global, immutable, decentralized and digital store of value.”
Bitcoin risks a deep correction to around $ 6,800 if it falls below its longtime technical support near $ 7,600.
Nevertheless, a rebound seems imminent if 10-year US Treasury yields continue to fall – it already hit a record low on Monday. This would encourage investors to explore more attractive safe havens, including gold and bitcoin. Overall, the next cryptocurrency rebound in hedging sentiment could allow it to close the CME gap near $ 9,060.
* Not * a short term market call at all – but it is this dynamic that will eventually set up for a parabolic movement in gold and imc bitcoin. Historically, gold has performed better, with real rates (nominal – inflation) falling the most. https://t.co/BIDhuTnq3n
– Ari Paul ⛓️ (@AriDavidPaul) March 9, 2020
Meanwhile, there is another $ 11,600 CME gap waiting to be closed.