Bitcoin bulls defended the $7.8K support as traditional markets continued to retract due to COVID-19, will Bitcoin prove itself as a volatility hedge?
As equities markets across the globe continue to post hefty losses, Bitcoin (BTC) traders fought to keep the digital asset above the $7,800 support. Less than an hour ago the Dow closed down more than 1,400 points and the S&P 500 posted a 4.89% loss as the World Health Organization officially announced that the Coronavirus is now classified as a pandemic.
The WHO announcement was followed by an ominous statement issued before the US Congress by Dr. Anthony S. Fauci, the director of the National Institute of Allergy and Infectious Diseases.
According to Dr. Fauci, the number of COVID-19 viral infections will continue to grow due to insufficient containment measures and contract tracing. Dr. Fauci told lawmakers that “it’s going to get worse” and he emphasized that:
“How much worse we’ll get will depend on our ability to do two things: to contain the influx of people who are infected coming from the outside, and the ability to contain and mitigate within our own country.”
Crypto market daily price chart. Source: Coin360
Given the clear correlation between Bitcoin’s price action and traditional markets, traders like Cointelegraph contributor Micheal van de Poppe expect Bitcoin to hover in the $7,600 to $7,300 zone for the foreseeable future until global markets show some sustained improvement.
In the event that Bitcoin fails to hold $7,300, van de Poppe believes that traders will shift their focus back to $6,800 and $6,400.
BTC USDT daily chart. Source: TradingView
The daily chart shows $7,420 as a key support level for Bitcoin to hold. At the time of publishing the relative strength index is dipping into oversold territory and on the shorter timeframe we can see the moving average convergence divergence (MACD) and relative strength index (RSI) attempting an oversold bounce but it’s clear that traders are reluctant to buy with sustained strength as Bitcoin continues to make lower highs and lower lows.
As mentioned in a previous analysis, a high volume surge could propel the price to $8,500-$8,600 as there is a large gap on the volume profile visible range but for the time being, traders have no preference for risk-on assets.
For the time being, traders are advised to exercise caution when engaging with oversold bounces as the current bounce shows a surge in buy volume little change in breaking the pattern of lower highs on the 4-hour timeframe.
BTC USDT 4-hour chart. Source: TradingView
A positive turn of events would entail Bitcoin price either continuing to consolidate around $7,800 or the price climbing back above the 61.8% Fibonacci retracement level ($7,978) and closing above $8,100.
Crypto Fear & Greed Index. Source: alternative.me
The Crypto Fear & Greed Index is still at 17, a level representing extreme fear on part of investors. In the past investors have utilized the sentiment metric as a signal to countertrade the trend.
While it is likely that investors are feeling tempted to open longs off this current dip, the uncertainty brought about by the Coronavirus has created something of a black swan event that is suppressing investors’ appetite for risk.
Another concern on investors’ minds is the fact that Bitcoin price is fast approaching the logarithmic trendline support. It’s a bit premature to speculate what the effect of dropping below the logarithmic growth trendline would be but it worth noting that such an occurrence has yet to occur since Bitcoin’s inception.
BTC USD daily chart. Source: TradingView
Shortly after equities markets closed, crypto trader Philip Swift posted the above chart and tweeted:
“Bitcoin price just briefly pierced through the log growth curve lower boundary on a day where it really felt like there was a lot of fear/hysteria in the markets.’China bans Bitcoin’ just wasn’t going to cut it this time around! Now let’s see if it can hold!”
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.