It’s only halftime, and Bitcoin is leading the financial crisis sentiment by 1-0.
During the first six months of the year 2020, the benchmark cryptocurrency experienced one of its biggest quarter-swings in more than two years. First, the coronavirus pandemic caused an unprecedented lockdown that soon resulted in a global market rout.
Stocks fell, gold plunged, government bonds went out of style – and Bitcoin, which was sitting atop the best year-to-date profits before the crash, became a global scapegoat to cover those losses. As a result, the unique asset lost more than 60 percent in just 24 hours of trading.
But then, Federal Reserve and its global equivalents came to rescue the market. They announced a giant monetary aid that not only stopped the sell-off but resulted in one of the sharpest pullback recoveries.
On March 12, Bitcoin’s YTD returns were 42 percent below zero. But at the half-yearly close on June 30, the same metric showed the price 29 percent higher. Bitcoin surged by about 139 percent from its March nadir.
Now that the thrilling first half is behind, it is time for the cryptocurrency to decide what it wants to do in the next session. Hardcore bulls want newbies to believe in a rally towards $20,000, $50,000, and even $100,000. Bears cannot think Bitcoin anywhere above zero.
At the same time, there is no significant event – like the “halving” in May 2020 – that could hint Bitcoin’s next bias. There is only a positive correlation with the US stocks that somewhat suggests a shaky sail ahead for the cryptocurrency.
Bitcoin enters its third quarter for the year at a time when coronavirus cases in the US are rising all over again. Despite hinting a slowdown in June, the number of infections started growing in June after the Black Lives Matter movement.
It was obvious—people who must have been practicing social distancing measures after the reopening stood hand-in-hand on the US streets. The result was a resurgence in the case, especially in Arizona, California, Texas, and Florida.
Those states have decided to reimpose lockdown. That directly impacts small and medium-scale businesses looking to reopen after facing hardships during the first lockdown. That also hurts the individuals who were hoping to go back to their jobs.
Read More on CoinStats Blog: Bitcoin, Wall Street, And The End Of Their Social Distancing
Meanwhile, warnings of more infections and overwhelmed hospitals keep arriving. The head of the Coronavirus task force, Dr. Anthony Fauci, alerted that the US could see as much as 100,000 cases every day.
“We now have 40-plus thousand new cases a day. I would not be surprised if we go up to 100,000 a day if this does not turn around,” Dr. Fauci told a Senate hearing. “I am very concerned because it could get awful.”
A second lockdown translates into a depressive stock market unless the Fed is willing to extend its stimulus program. Moreover, losses for stock market investors with in-depth exposure in bitcoin also put the cryptocurrency at risk of a deeper downside correction.
But will the Fed extend its quantitative easing policy when it may have to save the suffering US corporate sector? Let’s see.
Earnings Reports Ahead
There is so much uncertainty about the coronavirus that nearly 40 percent of the S&P 500 companies have decided not to publish their earnings forecasts. But the benchmark US index is sitting 24 percent higher from its March 23 low.
Why would an investor, in his/her capable sense, put his money into a market whose fundamentals are unclear? The lockdown has indeed robbed corporates off their second-quarter earnings, but their equities are rallying nonetheless.
Data provider FactSet reports that the companies’ profits have fallen by more than 40 percent in Q2. And most of them may end up revealing the results in their customary earnings reports after mid-July.
What’s worsening the economic outlook further is the record-setting number of bankruptcies since 2013. Financial Times reported earlier this week that a total of 3,427 companies have filed for Chapter 11 bankruptcy in the US.
Based on the narrative that is running amok for the last decade, Bitcoin is the answer to a financial crisis, such as the one taking place currently. But sadly, the cryptocurrency has left its safe-haven credentials to rally and plunge alongside the S&P 500, the Dow Jones, and the Nasdaq Composite.
That leaves Federal Reserve to call the final shots. As businesses fail, coronavirus cases rise, and lockdown gets imposed, the US central bank would have to do whatever it can to aid the market. It’s going to be a market surviving on a ventilator called endless money-printing.
But many, like veteran hedge fund manager Paul Tudor Jones, still see a silver lining. They believe Bitcoin will come of age as the Fed’s monetary policy results in a period of inflation. People will want to buy cryptocurrency as their savings lose value.
Unfortunately, that is not going to happen in the second half of 2020. So one should be prepared to sail the rough storm ahead.
Since you’re here, feel free to check out the CoinStats cryptocurrency portfolio management app to track and manage your Bitcoin and altcoin investments.