• Saturday, May 25, 2024
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Bitcoin, altcoins dust off gloom as market claws back gains

Luno Nigeria takes cryptocurrency literacy to Port Harcourt

The cryptocurrency market is starting to recoup some of the losses it saw in recent times as the price of Bitcoin rose to $6,900 representing more than 23 percent rise on Friday morning. Cryptocurrencies such as Ethereum, Bitcoin Cash and Ripple were in green recording 17.46 percent, 24.67 percent, and 11.67 percent respectively.

The Friday surge is said to be driven by investors looking for a relatively safe haven.

The price of bitcoin has been down 30 percent due to a sell-off by investors driven by fear of uncertainties that has gripped the global economy from the onset of the coronavirus pandemic.

In a note to BusinessDay, global cryptocurrency exchange, Luno said Bitcoin’s recent price drop has been significant but needs to be viewed alongside the changes in the other markets.

Read more: Why cryptocurrency market is no safe haven amid global volatility

The largest cryptocurrency, Bitcoin slumped to $4,463 early Monday morning despite news that the US Federal Reserve has cut interest rates to zero. The cryptocurrency has declined by 57 percent from the $10,500 high it posted on 13 February.

In the same time period, the DAX has dropped to a seven-year low, the FTSE 100 to an eight-year low, and BTC is only at a 12-month low, still up 26% year to date.

Since the Covid-19 pandemic was declared last Wednesday, stocks have officially entered a bear market, falling more than 20 percent from their peak in February, causing almost every single asset class to lose significant value.

“Bitcoin was formed in 2008, at the time of the last financial downturn and from then until now has always been seen as uncorrelated to the main markets,” Marcus Swanepoel, CEO of Luno said. “However, last week the unprecedented situation created by the coronavirus led to the highest ever level of correlation with the S&P500, as investors trading BTC alongside other assets looked for market value. This was not unexpected with Bitcoin behaving the same way as Gold and other assets, but over the next weeks and months we expect cryptocurrencies to move back to their uncorrelated position which will offer a very bullish performance in the medium to long term.”

The latest surge is likely part of the push back to uncorrelated position. But an analyst at Coindesk has said that a failure to keep prices above key support near $6,400 would weaken the immediate bullish case and allow a pullback to $6,000.

Even at $6,693 where it is as of time press time, the cryptocurrency is still trading about 40 percent below its mid-February high of over $10,000.

“For now, technically we will again give Bitcoin the benefit of the doubt that it is attempting to bottom but recognize Bitcoin will likely need months of consolidation to repair the technical damage now in place,” Rob Sluymer, technical strategist, Fundstrat Global Advisors LLC.