What’s the bitcoin price outlook amid the current oil-driven volatility?
The bitcoin price fell over 6% as US crude oil price sunk under zero for the first time in history. Still, the forecast looks good for BTC ahead of next month’s ‘halving’.
The Bitcoin price appears to have found support at US$6772 amid the current market volatility caused by oil’s latest price rout, based on IG trading data.
Oil price rout dragged down cryptocurrencies on Tuesday
As oil prices fell to historic lows on Tuesday 21 April 2020 - WTI crude and Brent crude futures each plummeted as much as 55.83% and 20.05% to as low as US$7.26 and US$20.11 per barrel respectively, riskier assets like cryptocurrencies were also impacted, with BTC’s price falling 6.4%.
As expected, crypto’s drops were a reverse of the rising volatility – IG’s Volatility Index (VIX) shot up over 14% between Monday and Tuesday.
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The equity market, generally categorised as equally risky, also retreated on the back of oil’s price collapse on Tuesday – which saw US crude fall below zero for the first time in history. The S&P 500 and Dow Jones Industrial Average indexes each fell 3.07% and 2.67% throughout the day.
The forex market was not spared as well, with the USD/SGD testing 23 March peak levels as investors flocked to the safe-haven US dollar for respite.
For now, bitcoin experts say the resistance point remains at US$7450 – a price level that bitcoin has tested two times but failed to break through since mid-March.
What is bitcoin ‘halving’? Why the bull case is still in tact
The long-term case, however, remains optimistic for BTC holders. Analysts maintain that the price of a bitcoin is still set for exponential gains later this year, thanks to a ‘halving’ event set to take place as early as next month according to industry observers.
Bitcoin halving is when the number of new bitcoins being issued are cut by 50%. New bitcoins are issued by the bitcoin network every ten minutes. It is said that this number is reduced by half every four years.
The number of new bitcoins issued every ten minutes for the first four years (2008 to 2012) of bitcoin’s existence was 50. In 2012, the number of new bitcoins issued every ten minutes dropped from 50 bitcoins to 25. In 2016, it dropped from 25 to 12.5. In this year’s halving, it will drop from 12.5 to 6.25.
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With a lower supply of bitcoins and demand still steady, the price is expected to rally dramatically. After the first halving in 2012, bitcoin price skyrocketed 930% in the preceding months. The halving of 2016 had helped to lay the foundations for the impending price rallies of 2017.
The upcoming halving had even led to some BTC enthusiasts like Antoni Trenchev, the founder of cryptocurrency lending facility Nexo, making seemingly outlandish predictions. Earlier this year, Trenchev famously predicted that BTC’s price will rise an estimated 635% to US$50,000 by the end of this year.
Bitcoin’s weekend rally comes to an abrupt end
Bitcoin’s latest drop had put an end to a four-day rally that saw its price peak at US$7232 a coin in the wee hours of Sunday morning (19 April 2020).
BTC’s price began to rise last Thursday 16 April 2020, after US President Donald Trump had stated that he plans to reopen the economy, with guidelines to be announced later.
At least 32 states out of 50 have been in partial lockdown since late-March, as the number of coronavirus infections quickly rose past the 700,000 mark.
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The oil price crash – reportedly caused by oil producers having to pay traders to buy oil from them as result of them running out of storage space in the face of the current coronavirus demand wipe-out, quickly erased those gains.
As at 09:00 GMT on Wednesday 22 April 2020, bitcoin is trading at US$6961 apiece.
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