While authorities and agencies are struggling to find solutions to stabilize critical supply systems in public spaces, central banks are using their weapons to tame the virus in the markets and avert the collapse of the global economy. The economic stimulus packages are beginning to take effect and are giving investors confidence. The Bitcoin exchange rate and other crypto currencies are also recovering.
Coronavirus and the international situation
The crisis packages of central banks and governments to support the economy did not leave the markets unaffected. In yesterday's trading, the US leading index Dow Jones recorded its biggest daily gain since 1933, while the DAX recorded its biggest daily gain since October 2008. The crypto market also made up some of its losses and is now seeking its old strength. But while a spark of optimism is spreading among investors, further global developments could herald renewed slumps in the world economy.
India locks in
The fight against the coronavirus requires logistical masterstrokes even from small countries and municipalities. The means by which the Indian authorities intend to keep 1.3 billion people in quarantine remains to be seen. The Press Information Bureau (PIB) of the Indian government formally announced the complete lockdown of the second most populous country in the world on March 24th and again communicated it to the world via Twitter.
With immediate effect, the strict measures will initially apply for three weeks and will put the supply systems in many regions of the country to a severe test. The virus could hit the slums particularly hard, where the poorest sections of the population live in cramped conditions without a functioning or clean water supply and are urgently in need of medical care.
Senate and government adopt conjuncture program
The US government and members of the US Congress from both political camps have agreed on the $2 trillion aid package to support the US economy. The extensive rescue package includes one-time payments to citizens in the amount of $1,200, liquidity injections for companies and hospitals, and a new regulation of unemployment benefits. The adoption of the gigantic economic stimulus package has brought relief to the markets, which reacted with historic price gains.
Traditional markets in a frenzy
The slumps on the stock markets since the outbreak of the Corona pandemic have put investors under a lot of pressure. Yesterday's trading day, however, saw the DAX soar. With a gain of just under 10.98 percent, the leading German index gained 959.42 points and finally closed at 9,700.57 points. Even when the stock market opened, the DAX continued on its successful course. The index starts just over 10,000 points with a gain of 3.17 percent at 10,008.20 points.
The US indices have also reacted positively to the US government's economic stimulus program. The Dow Jones was able to break through the 20,000 point mark again and ended the trading day with a plus of 11.37 percent at 20,704.91 points. The broader S&P 500 also gained around 9.38 percent and closed at 2,447.33 points. At the beginning of the trading day, the Dow Jones rose by 1.72 percent to 21,061.00 points, while the S&P 500 caught up by 0.80 percent to 2,466.89 points.
Crypto market in catch-up mode: Bitcoin on ground search
Gradually, the crypto market is also recovering noticeably from its losses. After the Bitcoin exchange rate slipped below 6,000 US dollars again on Monday, the largest crypto currency by market capitalization has been able to maintain its successful course since then and is currently quoted at 6,697 US dollars. Bitcoin has thus gained just under 2.3 percent in the last 24 hours and is approaching the 7,000 US dollar mark again.
The Altcoins are also picking up again after the dramatic slump. At currently 138.73 US dollars, the ether exchange rate (ETH) is 2 percent higher than the previous day. The crypto-currency XRP from Ripple was able to gain 1.5 percent and is currently traded at 0.161 US dollars. And the currency of the Internet of Things, IOTA (MIOTA), was also able to gain 2.5 percent and is currently trading at 0.143 US dollars.
"Volatility is part of the Bitcoin DNA"
According to Paul Hülsmann, the sales at the crypto market caused by the corona crash were not surprising.
Volatility is part of the Bitcoin DNA. Compared to the foreign exchange market, there is no central bank that intervenes in the foreign exchange market and either prints more Bitcoins or even collects them again to ensure a stable exchange rate. In my opinion, most crypto currencies should be considered more like commodities because of their fixed supply. Gold has also proven in the current corona crisis that it has a positive correlation to the stock market: When stocks fall, the price of gold falls. We are currently experiencing the same with "digital gold": Bitcoin. The difference, however, is that it is mainly institutional investors who are triggering the current volatility of crypto currencies: they hoped that crypto currencies would be a "safe haven". Due to their inexperience in the crypto sector, they are now the first to repel large volumes due to uncertainty [...].
The simultaneous collapse of the classical markets and the crypto-market has consequently exposed their close correlation. The Corona crisis will now show whether the crypto-asset market can decouple itself from the classic stock market and thus maintain its safe haven narrative.
Technical analysis of the Bitcoin course
Bitcoin was able to continue its positive development to date and further establish its position over US$ 6,000. Since March 13, it has been following an upward trend that has been tested several times, but never sustainably undercut. The indicators are again largely bullish. Both the MACD and the RSI are rising. Again, it is only the Aroon indicator that is providing a neutral result. All in all, the assessment is bullish. As medium-term trading strategies, one can take the following approach:
- Long Position: Entry USD 6,893.00, Targets at USD 7,396.10 and USD 7,988.78, Stop Loss at USD 6,186.76
- Short position: Entry with case below USD 5,539.09, Target at USD 4,936.00, Stop Loss at USD 5,814.72
On the hourly chart, a consolidation may occur soon. Although the indicators are bullish here as well, bearish divergences between the price development and the developments of the RSI and MACD can be seen. Therefore, in the short term we come to a rather bearish assessment. The following trading strategies can be used:
- Short position: Entry at fall below USD 6,277.14, target at USD 5,748.05, stop loss at USD 6,400.01
- Long position: Entry at USD 6,893.00, Target at USD 7,139.00, Stop Loss at USD 6,700.44
The start of a historic bull run?
The current developments in the crypto market have overturned in recent days, leaving many questions unanswered. Can crypto assets survive in times of crisis and serve as a safe haven? In the current situation, is there a chance that the crypto-market will decouple from the traditional market and do crypto-currencies represent a deflationary counter model in times of unlimited money printing?