Yesterday, the West Texas Oil Index (USDWTI) went to zero – and far below – for the first time in its history, as the country’s capacity to store excess oil ran out. Amid this complete route, Bitcoin (BTC) has become quite stable, and its number of active addresses has begun to climb again.
This below-zero price is possible because of the nature of the futures contracts involved: when the contracts expire, buyers are obliged to actually take possession of the physical commodity – with nowhere to store it.
Starting on a daily chart of Bitcoin, the S&P500 (blue), gold, Brent crude (black) and the West Texas Oil Index (purple), we can see that oil is collectively now the hardest hit sector of the global economy.
Cryptocurrencies like Bitcoin, always ultra-volatile but even more so in collapsing markets with no built in circuit-breakers against panic selling, had so far done the worst out of all asset classes. Gold has performed by far the best out of everything, with equities represented by the S&P500 having recovered somewhat from their March trashing.
Below on a 4-hour chart, we see the curious disparity between West Texas Oil Index (purple), and Brent Crude oil (black) in more detail.
This disparity is explained by the fact that, unlike American oil reserves which are collected and distributed in the American state of Oklahoma, Brent Crude – the international oil mark – can be shipped around by sea to facilities that still have capacity to store oil.
But oil is collectively hit nonetheless, because of a general, precipitous drop in global demand in all products – products universally produced and delivered with oil. And while Brent Crude has historically been lower than its current price (about $22), it has not been much lower.
Finally, looking at a 4-hour Bitcoin vs. Brent Crude chart, we see that Bitcoin is holding up quite well within a bullish parallel channel.
If we see this pattern continue to hold, we may start to consider Bitcoin to have put in a bottom to its regional market structure; and with dwindling options for investors seeking safe assets, there is a decent case that Bitcoin may start following gold up.
What’s more, Bitcon’s number of active addresses is on the rise and just broke the regional high 680,000. This may be a sign of crypto markets recovering after the ultra-violent selloff in March.
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