Market Wrap: Stocks’ Carnage Drags Bitcoin Down to $9K

Jun 11, 2020 at 20:32 UTC

Source: CoinDesk Bitcoin Price Index

Market Wrap: Stocks’ Carnage Drags Bitcoin Down to $9K

Markets are taking the U.S. Federal Reserve’s less-than-optimistic economic forecasts quite hard, and that’s leading crypto traders to hit the sell button. 

Bitcoin (BTC) was trading around $9,258 as of 20:00 UTC (4 p.m. ET), slipping 6.4% over the previous 24 hours. 

At 00:00 UTC on Thursday (8:00 p.m. Wednesday ET), bitcoin was changing hands around $9,890 on exchanges like Coinbase. By 06:00 (2 a.m. ET), its price began to decline, dipping to as low as $9,049. The price is now well below the 50-day and 10-day moving averages, a bearish technical indicator.

Bitcoin trading on Coinbase since June 9Source: TradingView
Traders are being confronted with a sea of red across almost all assets Thursday. Fed Chair Jerome Powell’s speech on the economy didn’t inspire any optimism about the next few quarters. “The virus and the forceful measures taken to control its spread have induced a sharp decline in economic activity and a surge in job losses,” Powell said in remarks Wednesday.

Unemployment numbers since 2000 – gray indicates previous recessionsSource: Bureau of Labor Statistics
“You can’t print your way out of this,” said Zachary Reece, managing partner of digital asset firm Lotus Investment Strategies Global. “I fear we are taking the opposite approach and will see the downfall of the United States dollar.” 

Indeed, the U.S. Dollar Index rose 0.4% off its three-month lows Thursday after Powell’s comments. That could signal investors are starting to look at classic safe havens like gold.

U.S. dollar index the past three monthsSource: Trading Economics
“I think the general negative sentiment of traditional markets affects bitcoin,’  said Sasha Goldberg, a senior trader for Efficient Frontier Markets, a digital asset quant fund. “We’re now seeing the following events priced in the market – riots in the U.S., the China-U.S. trade war, coronavirus uncertainty – among other events that happened lately.”

Bitcoin correlation to other asset classes has increased since the crashSource: CoinDesk Research
Bitcoin has increased its correlation to gold in 2020, particularly after March’s crash. The 90-day coefficient is close to 0.35, up from 0 back in January. A coefficient of 1.0 means two assets move in perfect tandem while a coefficient of -1.0 means they move in opposite directions. A coefficient of 0.0 implies that returns on the two assets have no relationship.

Bitcoin correlation to gold has increased since the crashSource: CoinDesk Research
Gold is one asset trading flat, down by less than a percent at around $1,727 for the day. “In my view gold is the safe haven for old-school investors and bitcoin for more modern-thinking ones,” said Henrik Kugelberg, a Sweden-based over-the-counter cryptocurrency trader. 

Cryptocurrency stakeholders have long insisted bitcoin is its own asset class, not tied to any other. However, it seems like it is increasingly operating with the traditional markets, at least for now.

Other markets

Bitcoin isn’t the only cryptocurrency taking a hit. Digital assets on CoinDesk’s big board are red Thursday. Ether (ETH), the second-largest cryptocurrency by market capitalization, is trading around $230 and slipped 7% in 24 hours as of 20:00 UTC (4:00 p.m. ET). 

Weekly Ethereum-based decentralized exchange (DEX) volume is picking up, slowly recovering from March’s coronavirus-induced crash when traders pushed volumes over $400 million for a short time.

Ethereum-based decentralized exchange (DEX) volume by weekSource: Dune Analytics
The biggest cryptocurrency losers on the day include neo (NEO) down 10%, tron (TRX) in the red 10% and iota (IOTA) slipping 9.7%. All price changes were as of 20:00 UTC (4:00 p.m. ET).

Oil isdown quite a bit, slipping 7% with a barrel of crude priced at $36 at press time.

Contracts-for-difference on oil since June 9Source: TradingView

In Europe, the FTSE 100 index of top companies in Europe fell 4% Thursday as job cuts were announced at several companies. In Asia, the Nikkei 225 index of publicly traded companies in Japan ended trading in the red 2.8% as companies were dragged down on the U.S. Federal Reserve’s outlook. 

In the U.S. the S&P 500 index fell 5.8%, with major selling in the final hour of trading as coronavirus-induced economic numbers put a damper on the market. U.S. Treasury bonds were mixed Thursday. Yields, which move in the opposite direction as price, were up most on the two-year bond, in the green 18%.

Disclosure
The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Market Wrap: Stocks’ Carnage Drags Bitcoin Down to $9K


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