Analyses

Fears for global economy spread like wildfire, fin markets respond accordingly – BTC, ETH, LTC Price Analysis, 16 Mar, 2020

The last few weeks have been the worst for the financial markets since the global financial crisis of 2008. For instance, the US stock market index S&P 500 dropped by 29% to 2,403 from 3,386.

The extreme fear has grasped the crypto market as well. On March 13th, the price of Bitcoin tumbled to $3,800 per one digital coin—the lowest level since March 2019. On that day Michael Novogratz, a prominent Bitcoin bull and Galaxy Digital CEO, wrote in a Tweet, that investors lost confidence not only in the global markets but in Bitcoin as well:

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Source: Twitter

To combat the global economic turbulence and to regain investors' confidence central banks all over the world have decided to implement additional monetary stimuli. On March 12th, the European Central Bank decided to inject additional liquidity by increasing the asset purchase program by €120 billion. On the next day, in the light of negative shocks to the global economy at an unscheduled meeting, the Bank of Canada lowered its key interest rate by 50 basis points to 0.75 percent. And the biggest surprise came on Sunday, March 15th, when the US Federal Reserve at an unscheduled meeting decided to cut interest rates to near zero and to restart its quantitative easing (QE), as part of an effort to stabilize the economy and disperse fears about a potential recession.

The steps undertaken by the central banks may have a solid impact on the cryptocurrencies in the long run. Let us remind you that Bitcoin was launched back in 2008 at the very beginning of the global financial crisis when major central banks lowered interest rates to near zero and, also, invented QE programs. Moreover, we know that the Genesis Block of Bitcoin included a message relating to the launch of the QE program in England at the beginning of the global financial crisis: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks".

However, the effect from the central banks' monetary stimuli on the cryptocurrencies will not be immediate. Crypto is a long-term game, and it needs time. 

Although in the long run cryptocurrency has a bright future, in the short term we may witness solid price declines as the past week's bloodbath. At the time of writing, according to Coin360.com, crypto is still in the red zone. One Bitcoin costs €4,381.94 (-7. 25%), one Ethereum—€99.52 (-9.68%), and one Litecoin—€29.06 (-8.47%):

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Daily crypto market performance. Source: Coin360.com

BTC/EUR

On the daily chart (1D), BTC/EUR has returned into the «descending channel»:

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The return of the price into the «descending channel» signals that bears are getting traction. That's why we think attempts to buy the dip and benefit from an immediate price rebound from the lower line of the channel are quite risky. It is like trying to catch a falling knife.

ETH/EUR

On the 1-day chart (1D), the price of Ethereum has returned into the «descending channel» as well:

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From the chart above we can see that the price of Ethereum is hovering near the psychological level of €100 per one digital coin and, hence, it is slightly below the previous local low from December 2019, but still above the local low from December 2018. Theoretically, ETH/EUR may find support between these two local lows or between €73 and €107. But, as mentioned in the section about Bitcoin, trying to catch a falling knife is not a preferable way of trading.

LTC/EUR

In the 1-day time frame (1D), the price chart of Litecoin is quite similar to the ones of BTC/EUR and ETH/EUR. It has returned into the downtrend as well: 

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In our estimation, currently, there is a systematic risk for the crypto industry and the correlation between the prices of the major cryptocurrencies will remain quite high in the near future. That's why we think most of the cryptos will behave similarly in the next few weeks.

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The analysis is purely informational and does not constitute investment, financial, trading, or any other sort of advice and you should not treat any of Bitvalex's content as such. Bitvalex does not recommend that any cryptocurrency should be bought, sold, or held by you. You are solely responsible to conduct your own due diligence and consult an advisor before making any investment decisions.


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