Bitcoin Sinks to $4,390 as Dow’s 1,000-Point Drop Risks Bigger Breakdown

Bitcoin jumped towards $6,000 in overnight trading as Federal Reserve reduced its benchmark interest rates, but trimmed gains as some traders liquidated their positions for cash amid sell-off in stocks.

The bitcoin-to-dollar exchange rate plunged to $4,396.50 by 10:05 UTC, bringing its 24-hour losses further up by 13.78 percent. The bitcoin futures contracts listed on CME were also trading 15.67 percent lower into the day – at $4,495 – signaling that the cryptocurrency could dip further heading into the Monday’s US session.

bitcoin, dow, cryptocurrency, crypto

Bitcoin Futures on CME plunged on Monday | Source: TradingView.com

Bigger Breakdown Coming

Bitcoin’s downside moves came in tandem with a plunge in global equities. Futures linked to the Dow Jones Industrial Average, for instance, hinted that the index would open 1,242 points lower on after the opening bell on Wall Street this Monday, according to CNBC premarket data.

The downside projections appeared despite the Fed’s supportive measures. The US central bank on Sunday slashed rates to near-zero and restarted bond-buying to protect the economy from an ongoing collapse led by the escalating Coronavirus pandemic.

Under ideal circumstances, stimulus policies could have led investors to pump equities. But it didn’t happen, demonstrating that investors are looking to hold nothing but cash until the virus comes to a halt. The unconventional sentiment created troubles for bitcoin, a unique asset often projected as the “digital gold” for its so-called safe-haven features.

The cryptocurrency failed to secure investors against the Coronavirus backdrop, following stock markets to their downsides. That includes its biggest single-day plunge in seven years that saw its rate crashing from $8,000 to $4,266.

With Dow now projecting a major drop, its short-term correlation with bitcoin has left the cryptocurrency under the risks of a breakdown. Bitcoin today closed below $5,000, a technical support target, raising the possibilities of an extended move lower towards $4,100, as shown in the chart below.

bitcoin, dow, cryptocurrency, crypto

XBT/USD risks crash as investors ignore the Fed’s rate cut announcement | Source: TradingView.com, BitMEX

A further break and price could crash towards its 2018 low of $3,121.

Bullish Takes

There is a slight possibility of bitcoin to bounce back towards $6,000, given if the Descending Channel Support plays out in its favor. Unfortunately, these are not normal circumstances to rely on technical indicators. If equities drop, then liquidation of bitcoin positions seems certain.

But for some, the cryptocurrency still has fuel to begin a new upside move. Jonathan Leong, the co-founder & CEO of crypto trading platform BTSE, said bitcoin could rise once central banks push their interest rates into negative territory.

“With the FED effectively cutting interest rates to zero, it seems evident that negatives rates are just around the corner. Good thing there’s a plan B,” said Mr. Leong as he referred to Bitcoin.

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Source: Newsbtc

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