Over the years, it became accepted wisdom that Bitcoin was a store of value, and that it could work as a hedge against market fluctuations. However, this has not turned out to be the case during the course of the current prolonged market turmoil. After the oil price crash on Monday, the world’s biggest cryptocurrency has continued to slump at an alarming rate. After having found resistance at $7,200, BTC soon plunged to $6,800 per token yesterday, and it remains to be seen whether it can manage to recover today as the market turmoil continues.
Oil’s Plunge Triggers BTC Sell-Off
On Monday, oil prices tanked as oversupply fears grew among traders and institutions. Traders started winding down their positions in the West Texas Immediate contracts and thereby sent the price of oil crashing. The price of oil sank into the negative territory, which indicated that entities were being paid to take oil from distributors. The historic sell-off resulted in a collapse in the financial markets all over the world, and in this regard, Bitcoin did not prove to be an exception. Stocks declined all over the world, and Dow Jones Industrial Average opened lower this morning as well.
The equities markets have now started to have a correlation of sorts with the price action in Bitcoin, and that was seen yet again as both declined in lockstep. The massive decline in the crude oil market has also had a profound impact on the stock markets, which were already reeling from the sell-off brought about by the coronavirus pandemic.
In addition to that, BTC is going to have its halving event in less than a month, and traders are likely considering the possible effects of the market situation on that event. In the past, BTC experienced a bump in price after a halving event, but there is uncertainty whether this will be able to happen under current circumstances. Investors and traders are likely to keep a close eye on Bitcoin in the coming days as it tries to recover lost ground.
Featured image: DepositPhotos © alexeys