Bitcoin Has Fallen Into Oblivion… Again
At the time of writing, bitcoin has fallen by roughly $500 in the past 24 hours. Just yesterday, the currency was trading as high as $6,700, but now it has seemingly fallen to as low as $6,250. That’s a slip of roughly seven percent. What could have caused such a dramatic fall in such a short period?
While it’s unclear what specifically pertains to bitcoin, it looks like the currency isn’t alone in its present descent. Ethereum – the world’s second largest cryptocurrency by market cap and the number one competitor to bitcoin – has also taken a hard fall, trading for about $130 at press time when just yesterday it had moved beyond the $137 mark.
It looks like both these currencies – along with various altcoins – are trapped in a period of consolidation. Siddharth Jha, a former Wall Street analyst, comments that bitcoin likely just moved up faster than everything else did. A little too fast, and now it needs time to reset itself. He states:
I think bitcoin just moved up from its $4,000 – $5,000 crash range earlier than equities did. While equity markets have been rallying the last couple of sessions, other more safe-haven type markets like bonds and gold have been consolidating.
Rather than simply taking the time it needed to move up at a more gradual pace, bitcoin did so too quickly, and thus reached further than where it could grab. Jumping too fast is going to result in a wobbly landing, and BTC is now coming in for that landing.
In addition, despite the passing of a record stimulus package by the U.S. government meant to fight against the negative financial effects of the coronavirus, it looks like every asset within the U.S. and abroad needs time to fix itself up and get back into the “gist of things.”
Stocks, for example, tumbled again following a three-day surge that ultimately led up to the passing of the stimulus bill by the House of Representatives. The stock market initially began spiking the previous Monday in anticipation of the bill but came to a standstill not long after. It makes sense that bitcoin, a leader in the crypto space, would likely experience some of the same behavior.
Our Economy Isn’t What It Was
While the money is coming, this isn’t necessarily going to assist against business closures and long-term unemployment resulting from the coronavirus. Mohamed A. El-Erian – chief economic adviser at Allianz – wrote in a tweet that the stimulus bill helps to prevent further damage but that:
Unfortunately, [it] can’t avoid a deep and sudden recession resulting in alarming unemployment and business closures.