Bitcoin’s Free Fall — A Conspiracy?
17.03.2020
“This is not a story that ends well, this is a story that ends very very badly!” — Brent Johnson on the Dollar Milkshake Theory.
Exactly a year back, the CEO at Santiago Capital premiered with Real Vision to talk about the global economy crisis that he could foresee. In the interview he mentioned how a global currency crisis would happen really soon, which would strengthen the US Dollar leaving all other currencies, stocks and equities at a backlash.
Today, we are the witness to one such big economy crisis that has created a turmoil all around the world. Plenty of reasons that back it up, also include the declared global pandemic, COVID-19 and it may be true. But what overall factors does this crisis bring with it, is the question of the hour.
Bitcoin, the world’s first ever cryptocurrency born from the flames of the economic meltdown in 2008, experienced a similar recession like 2018. BTC in the recent free fall retested to the $3,800 range, losing all its support zones at $7800, $7500, $7300, $7100, $6900, $6500, $6300, $6100, $5800, $5500, $5300, and so on. This was an unimpressive sight that took people back to a flashback of December 2018.
Nearly a total of $73 billion has been wiped off from the markets, due to the crypto free fall, from $223 billion to $151 billion on Friday, 13 March 2020.
Has the evil powered 13th proved to be a black friday for the global markets?
BTC fell 40% in just over 24 hours to levels not seen since April 2019. This has led to a dilemma that raises a question on how will these digital currencies react to the possibility of the financial collapses.
Amidst the crisis, The Federal Reserve has planned to inject $1.5 trillion into the hands of private banks, to fight against the global crisis.
Does this bloodbath in global markets promise a better Return on Investment in a long term perspective?
“Ahead of the halving, we have a half-price sale and it won’t last long. The market oversold correlated global economic jitters & its not hard to see a short term correction.”, said Landsberg Sadie on the crypto market crash.
The near future looks hyper volatile and chaotic for investors, therefore will this be an opportunity for investors to gain exposure to the asset class at attractive prices or will they look at diversification strategies of their assets and currencies, to protect & preserve their value?
When it comes to a global currency crisis, Johnson said, this crisis will lead to 3 factors, which includes:-
- Strengthening of the US Dollar
- This strengthening will lead to a problem in the global marketplace
- Automatically reacting to a currency crisis.
Even during a global currency crisis, the U.S will be seen as a safe haven, because “All roads go through the dollar.”
Of course there need to be factors that are leading to an unpredictable global currency crisis and one of the major market free falls, to which reports around the world say, the major reasons could be,
- COVID-19 lock-downs across nations
- Oil price wars between Saudi Arabia & Russia
- Global Stock Market Crash
Just after the initial drop in price, a lot of investors and traders started to wonder and research the new crash. The main question still remains: Why did this happen?
While this is more than understandable, especially considering how much money, time, and patience people have invested in crypto, the reasons behind the new crash remain obscure to many.
As Bitcoin, and by extension, the entire cryptocurrency industry evolved, it has recorded both retail, as well as institutional capital inflow. Then there’s the question of how correlated the crypto-asset really is. For instance, the realized correlation for the two assets, Bitcoin and Gold, has been positive for a significant part of 2019–2020, with some arguing that for certain periods, Bitcoin appeared to follow Gold’s pattern.
But is this all? Can this free fall in cryptos have origins from elsewhere? Let’s get deeper into the study…
“The sudden drop in prices seems to arise out of the selling of bitcoin by Plus Token”, said the Chief Executive of India-based crypto exchange Coinswitch.co, Ashish Singhal to a renowned crypto news website.
Reports say, the scammers from the aforementioned crypto wallet service moved a little over $100 million worth bitcoin to so called crypto mixers and then sold off the BTC causing prices to fall as supply increases in the market.
Bitcoin deep dived to a 2 month low because of a $100 million liquidation, according to analysts and experts in the industry. They have named this free fall as A head and shoulders breakdown.
The suspected inflow of BTC in exchanges has brought the relatively illiquid market, causing prices to fall, which in turn has led to further inflows leading to a free fall in prices.
Other negative macro factors that may have pushed the crypto king’s prices lower, could be the equity market sell off & record low in the U.S Government bond yield.
Here’s a glimpse of what the crypto market looks like from the last few days-
BTC/USD- (CMP: 5398, 17 th Mar 2020, 13: 00 IST)
Breaking a significant support level at 6700 regions, Bitcoin declined in the 2nd week of March, simultaneously turning the Primary trend down once again. At this point, we find 6200 for Bitcoin to be of significant resistance below which short term downtrend persists. Hourly chart clearly reveals the series of lower tops that reasserts the supremacy of bears. Below 4900, BTC might resume its downward journey.
Whether the sudden market crash is a global emergency, or a ponzi scheme tactic, this free fall makes room for one of the largest retests in the world economy and crypto markets.
