If the Price of Oil Rises, What will be with Bitcoin?
Bitcoin usually doesn’t show any correlation to traditional assets. Still, it fell below $8,000, specifically after the oil market crashed by over 30%, which was the largest single-day decline in three decades.
After several weeks of stubborn conflict of interest between the United States, Saudi Arabia, and Russia, oil prices began to recover. Does it mean bitcoin bulls will feel more encouraged by the market conditions?
Listing.Help analysts note that in recent weeks, bitcoin and oil have shown a very close correlation. The interference of price changes was maybe even more relevant than bitcoin’s comparison to the stock markets. When prices intensified in volatility, the bitcoin-oil correlation was slightly delayed.
We would like to note that this correlation is only temporary and may be valid, specifically during market turmoil. Historically, bitcoin has very little to do with oil and may even demonstrate an inverse correlation at a later date.
Since the start of the month, oil prices bounced back and increased by over 25%. Currently, Brent and WTI futures are trading at $35 and $28, respectively, up from $25 and $20 early this March.
Last month, Saudi Arabia started a price war against Russia by boosting crude output and cutting prices, which surprised markets, especially when demand is tumbling amid the COVID-19 pandemic.
On April 9, OPEC + countries signed an agreement on the largest-ever reduction in oil production by 10 million barrels per day or 10% of world consumption before the coronavirus crisis.
The deal should end the price war between Russia and Saudi Arabia, which lasted exactly a month. This is much smaller than similar conflicts in 1986, 1998 and 2016, but the consequences are worse than at least the latest crisis, Bloomberg writes.
Oil reacted little to the publication of the text of the agreement: the news influenced markets back the night after the first reliable details of the agreement appeared. However, the correlation between oil prices and bitcoin, even against the backdrop of this agreement, has persisted. Already this morning, oil prices corrected from their local maximums almost immediately behind it; the price of bitcoin also fell in the region of $ 6900.
The general optimism has boosted oil prices, and this might be additional support for Bitcoin to consolidate above $7,000. So far, the largest cryptocurrency hasn’t managed to maintain above that level, but but if there will be any positive assumptions, bitcoin can respond with growth a little later after the oil market.
