Around 04:00 UTC on Monday (March 9), the Bitcoin price fell to its lowest level in two months amid continued panic in the markets caused by the COVID-19 pandemic and the oil price war between Saudi Arabia and Russia that started over the weekend.
According to data from CryptoCompare, although Bitcoin had been trading as high as $9,158 on Saturday (March 7), between 04:05 UTC and 04:10 UTC on Monday (March 9), the price to of Bitcoin fell from $8,034 to $7,935:
This is the first time that Bitcoin has traded below $8K since January 9:
As you can see from the 24-hour BTC-USD price chart, Bitcoin has fallen over 10% in the past 24-hour period against USD. Although this is a large drop, crypto is not the only asset class that is being punished at the moment.
The increasing level of panic in the financial markets is caused primarily by concerns about whether the world (excluding China) is prepared to take all the measures necessary to control the spread of the SARS-CoV-2 coronavirus and worries over what this means for the global economy.
And although Bitcoiners have long referred to Bitcoin as the ultimate store-of-value, Bitcoin’s recent price action suggests that Bitcoin is currently behaving more like a risk-on asset than a risk-off asset.
This is what popular macro-economist and crypto analyst Alex Krüger had this say on this subject yesterday:
— Alex (@classicmacro) March 8, 2020
And this is what Krüger had to say earlier today:
Crypto investors should thank crypto is not fully connected to financial markets. Otherwise it would have been decimated. But panic creeps around. $BTC at 6400 soon should not surprise anyone. These are uncharted waters. When moves of this magnitude occur, everything is possible.
— Alex (@classicmacro) March 9, 2020
A few whales could panic, or could be forced to sell assets to cover losses somewhere else, or could decide to liquidate positions to take advantage of bargains in other asset classes. So when this kind of events takes place, careful with taking on too much risk.
— Alex (@classicmacro) March 9, 2020
Another prominent crypto analyst Josh Rager is also bearish (at least in the short term) on the outlook for Bitcoin amid all of this uncertainty:
Lowered my bids for Bitcoin longs
Had low $8000s but canceled them for lower targets
The $7ks look to be coming and after selling some ETH at $270, will look to buy ETH lower along with BTC longs
Will also look to short any significant bounces right now
— Josh Rager 📈 (@Josh_Rager) March 9, 2020
In fact, the main two asset classes that seemed to have fared well over the past few weeks are U.S. Treasuries and gold.
Over the weekend, the chances of a major recession in the U.S. increased after an oil price war got started between Saudi Arabia and Russia over an inability of the two parties to agree on the best way to deal with the decreasing demand for oil, which has been caused by COVID-19.
Apparently, Saudi Arabia wanted OPEC members and Russia to reduce their oil production, but Russia was not prepared to do so (possibly because it feared that such a move would help U.S. oil producers). Saudi Arabia decided to protect its market position by dropping its oil price and increasing its oil output, and Russia seems to have countered by deciding to also increase its oil output.
Goldman Sachs analyst Damien Courvalin is reported to have told the bank’s clients on Sunday:
“We believe the OPEC and Russia oil price war unequivocally started this weekend when Saudi Arabia aggressively cut the relative price at which it sells its crude by the most in at least 20 year…
“The prognosis for the oil market is even more dire than in November 2014, when such a price war last started, as it comes to a head with the significant collapse in oil demand due to the coronavirus.”
The collapse in the price of oil will hurt oil producers around the world, and increases the chances for a global recession.
Aaron Gong, the head of Binance Futures, noted earlier today that the price volatility of crypto does not seem so bad at the moment when one looks at other markets:
I came from the commodities industry, crude is one of the products that I used to deal a lot. Knowing it's a pretty volatile market but when it is tumbled more than 30% in a single day, I started to think #crypto market is now moving like fixed income products. pic.twitter.com/mWnt74sHcb
— Aaron Gong (@AG_Binance) March 9, 2020