Cryptocurrency Market Outlook 30th March 2020

Market News

President Trump has backed away from calling for a full quarantine of COVID-19 hotspots in New York, New Jersey, and Connecticut.

He instead directed that a travel advisory be issued for those areas to help stem the spread of the outbreak in those hard-hit regions. 

Trump also indicated that the federal government’s guidelines for social distancing would last until at least April 30. This is in contrast to his previous comments that he hoped Americans would be able to return to work by Easter. 

The U.S., Italy, and France are now trialling the anti-malarial drug Hydroxychloroquine for use in the treatment of severely affected COVID-19 cases. There is hope it can provide immediate benefits as it is already approved as a malaria and anti-inflammation treatment by the Food and Drug Administration. 

The use case for Bitcoin and other currency alternatives that have limited supply continues to increase. This is because, despite the short term risks associated with holding cryptocurrencies in uncertain times, central banks around the world continue to participate in open-ended quantitative easing programs. 

The US federal reserve balance sheet is now at $5.2 trillion, with Bank of America data showing this is likely to reach $9 trillion before the end of 2020.

The extent of this quantitative easing, which is essentially money printing, provides huge long term downward pressure on the value of global fiat currencies, including the US dollar. 

Bitcoin, by contrast, despite its highly volatile nature at present, has far stronger fundamental properties as a store of value because its supply is mathematically limited to 21 million Bitcoins, which can never be increased. 

To further illustrate this point, in 2010 the total global stock of U.S. dollars was $8.4 trillion. However, over the last 10 years, this total stock has nearly doubled to $15.62 trillion.

This rapid expansion of the money supply provides enormous inflationary risks in the future and threatens the purchasing power of people’s savings. 

Bitcoin Technical Analysis

Bitcoin is showing continued weakness since breaking down from the $6,600 support line.  This has led to a further selloff overnight, with BTC now trading around the $5,900 level, which is below the 20 day moving average. 

This indicates that further bearish momentum is likely, although to this point the selloff has not been supported by strong volumes. Volumes have remained in a clear descending trajectory ever since the original severe March 13 dump that coincided with the global stock market crash.

Considering the low volumes, we can expect more major movements soon. 

As Bitcoin appears to have broken out of a bear flag formation, that could provide a price target as low as $2,600. 

When considering the potential bullish case, this is mainly related to how the fundamental strengths of Bitcoin are viewed alongside other perceived safe-haven assets such as gold. 

Both gold and Bitcoin have recently seen selloffs that coincided with the wider market plunges as people face liquidations and look to cover losses. If strength returns to gold, we may also see bullish action return to Bitcoin.