The economy and cryptocurrency market may be under attack if new restrictions are imposed due to the coronavirus. The us President urged Americans to wear masks and observe social distance
The situation with coronavirus in the United States may get worse before it gets better, us President Donald trump said. He added that the situation with the spread of COVID-19 is the same in the world. Some countries are returning the mask mode, for example, such restrictions were introduced in Austria on July 21. If a new mass quarantine is introduced, the stock market and the cryptocurrency market, which are highly correlated in 2020, may fall sharply.
Nikolay Klenov, a financial analyst at Raison Asset Management, an investment company, stressed that despite the growing number of cases in the US, the fed and trump are doing everything not to return quarantines. The authorities understand that the new lockdowns will deal a huge blow to the economy. The unemployment rate in the US is still high (according to data for June-11.1%), consumer demand, on the contrary, is low. Savings rates in the US are now at record levels: people prefer to save rather than spend, the expert added. In response to the lack of demand, enterprises reduce production and employees-it turns out a vicious circle.
Two COVID-19 drugs are due to go through the final stage of trials in the US this month, with four more drugs awaiting their turn in August. Much of the stock market will depend on how successful these tests are, Klenov explained.
"If the drugs show effectiveness, the stock market will continue to grow. If not, and the number of cases in the United States and the world will increase — we are waiting for a fall in the stock market. However, it will not be as deep as the March one — the drawdown will be approximately 20-30% of the March indicators. This is a moderately negative scenario. In a totally negative scenario, the pandemic will rapidly gain momentum and the US government will be forced to declare new quarantines: in this case, we may see a repeat of the March fall, " the analyst warned.
According to him, when the market subsides, global players will most likely begin to sell off the cryptocurrency, reducing its value. If the news about COVID-19 is positive, bitcoin, on the contrary, will continue to grow, the expert predicted.
The main digital coin is currently trading at $9335. Since the beginning of the year, it has risen by 29%, and since mid — March 2020-by 176%. At the same time, stock markets are also growing. Yesterday, July 21, the S&P500 index reached its peak since February of this year, and on July 6, the NASDAQ updated its historical maximum.
At the moment, American investors have a lot of positivity, they believe that the market will not sink while trump is "at the helm", explained financial expert, entrepreneur and investor Jan Marczynski. Investors believe that in case of any problems, the us President will allocate or" print " as many dollars as the market needs.
"If we believe this logic, even in the case of a new wave of virus, quarantine measures will be weaker, there will be less fear and panic in the markets, as investors will expect that any drawdown will be flooded with money and the market will grow. Therefore, the drawdown itself will be insignificant. Experienced investors know when large masses of people have such confidence, this is a sure sign that the situation should happen exactly the opposite, " Marchinsky warned.
According to him, the size of the inflated bubble in American markets has reached a record size, and it would be appropriate to reduce it. In this case, there is a situation when inexperienced investors expect growth and do not believe in drawdown, large players can specifically bring down the market to earn all the money that less experienced investors have invested, the expert suggested.
"The fact of printing dollars in unlimited quantities is also confusing. International investors see this as a risk, and if the fed decides to turn the printing press back on high, they will start selling off American assets, which could be the beginning of a very deep fall. In this case, the markets may fall by 40-50%, i.e. the S&P 500 may fall to levels less than 1700-1900 points. After the us market, sales will begin on all world markets, and Russian assets will also fall to similar values, " the investor predicted.
It is important to take into account the factor of the us presidential election this year, said Marcinski. Perhaps trump's main trump card in the fight for the presidency will be the stock market, so he will do everything possible to keep quotes at adequate levels, sacrificing quarantine and restrictive measures. However, the most realistic scenario for the entrepreneur is another decline this year, which will lead to the second wave of COVID-19.
Experts expect markets, including cryptocurrency, to decline if the situation with the spread of coronavirus infection worsens. The value of American shares is called inflated, so there is also a risk of a decline in the second half of 2020. Most likely, this will negatively affect the quotes of bitcoin and altcoins.