While headlines about tanking bitcoin prices serve ideal opportunities for investors to enter the cryptocurrency market, one top analyst thinks the asset is lacking new buyers.
Alex Saunders, the CEO & Founder of Australia-based Nugget News, offered a wave of discouraging catalysts that might have driven people out of cryptocurrencies, including a wrecked US job report. More than three million Americans filed for unemployment last week, providing first-hand information about how the Coronavirus pandemic is affecting the US economy.
“A downside is [now] likely for stocks & crypto,” asserted Mr. Saunders. “I’m predicting it by next week. Are new investors entering crypto? I’m not convinced.”
The statements suggested a potential drop in bitcoin’s retail demand as jobless people turn to cash as their last resort amidst a pandemic. Meanwhile, institutional investors are also reducing their exposure in the cryptocurrency market for cash liquidity: to cover their margin calls or just hold it near to find buying opportunities in a wider bearish market.
Buying Sentiment on Hold
Bitcoin has long enjoyed the status of an offbeat, non-correlated asset that could behave as safe-haven for investors in times of economic crisis. But in its first face-off with the one, the cryptocurrency has chosen to follow the bearish moves of stocks and similar risk-on assets.
The following months will be crucial for Bitcoin to prove itself as an uncorrelated safe-haven asset. So far, in this bear market, it’s been relatively correlated and has significantly underperformed gold.
— Larry Cermak (@lawmaster) March 27, 2020
For some, bitcoin’s long-term bias remains bullish. Brad Mills, partners at US-based private investment firm Xsquared Ventures, admitted that he sold some of its bitcoin holdings believing that the next three months will be bad for every asset. But he added that he will buy again.
“I’m still long term bullish, but the next 3 mths will not be good for any asset.” the analyst said. “There’s volume to exit now. Bitcoin will eventually decouple, but when the gravity of [Coronavirus] and the recession hits the USA, we will see another huge selloff. That’s when I buy.”
The Next Bitcoin Dip
As the hunt for the next-best buying opportunity continues, bitcoin has marked a fresh downside target in the $4,200-4,400 area following its latest move on Saturday.
The bitcoin-to-dollar exchange rate has broken out of its Rising Wedge pattern, confirming a broader move to the south. Mr. Saunders earlier noted that the pair could confirm the classic bearish indicator with a plunge, further validating it with the double top formation near the $6,900-area.
BTCUSD breaks Rising Wedge support | Source: TradingView.com, Alex Saunders
The $4,200-support could offer investors the opportunity to enter the bitcoin market again. Nevertheless, a further breakdown could leave the cryptocurrency with the possibility of testing lower $3,000 levels.