Just when you think, things couldn't get any worse with the financial markets…
Last week it did…
Not only did we experience the worst week for stocks since ‘Black Monday' in October 1987…
We also saw major crashes in the cryptocurrency markets.
I'm talking about cryptos falling (in the past five days):
• Bitcoin -33% and -60% for the month
• Ethereum - 30%
• Ripple -25% and - 52% for the month
It seems like the spreading of the Coronavirus has triggered a universal wave of selling just everything…
In today's article, we'll go through the two reasons why Bitcoin has crashed and one reason why I expect it to drop another 70%.
Pickpocket Trader just closed a massive 323% gain on the US 500…
In the same week, his followers could've banked another 51.57% % on brent crude and 15.8% on Merck!
Bitcoin enters a liquidity crisis
If anything, the COVID-19 has sparked a major liquidity crisis.
This is causing financial markets to crash as well as ALL safe haven assets including bonds, crypto-currencies and precious metals.
What you need to know is this…
A ‘Liquidity Crisis’ is when major investors decide to exit out of their positions at the same time…
This is what happened with Bitcoin as it crashed over 33%, in a few days.
As the sellers outweigh the buyers, this leads to investors desperately trying to cash out by exiting at lower prices…
This was on the back of a number of events that took place last week including:
• The US announced a national emergency
• The Fed cut interest rates down to 0
• Italy’s hospitals become overrun with patients and fail to treat all
• Spain declared a nationwide lockdown
• Travel bans increased as 155 countries have been affected
• Uncertainty with global markets unprecedented moves
According to data from CoinMarketCap
“In the past 24 hours, trading volume for Bitcoin totalled just $31 billion, down from peaks of near $80 billion — the highest on record.”
And so, with the selling bringing down the price to new record levels, this leads to the next reason…
Cash is once again the safest option
Bitcoin does not have any mechanism (circuit breaker) like traditional markets that stop trading if the price drops too much…
With the 33% crash we saw, this could fail to attract new investors into the market and scare away previous investors permanently.
And so the safest most risk-averse action to take, is to liquidate all financial and alternative assets and rather build-cash reserves for the uncertain future…
Once again Cash is KING.
As clichéd as it sounds… It’s a cliché for a reason.
Even Kevin Kelly, lead analyst at a crypto-currency analysis firm in New York, says:
“You’re getting to a point where markets are pretty frantic across the board, and today is a move toward cash,”
Bitcoin broke below its 3-year uptrend
Looking at the daily chart of Bitcoin, you can see it’s formed a huge triangle pattern since May 2017…
And in the last month, it’s moved from $10,000 all the way down to $4,397 (56% drop).
It also broke below the 3-year uptrend support (floor level), telling me the sellers are dominating the market…
If we see another 5% drop in price, this will scare a lot more investors out of Bitcoin which can send the price back to its previous support level at $1,544.
That’s another frightening 70% drop from where it currently is ($5,281 – $1,544 ÷ $5,281)…
Here's how you can profit from Bitcoins next crash
First, you can sell (go short) and profit from Bitcoin CFDs. You can do this by signing up with one of our recommended brokers…
Second, Trader X could soon be adding crypto currencies to his Pickpocket Trader
service... This will be the first Crypto Currency short term trading service launched in South Africa.
Analyst, Red Hot Storm Trader
A small group of savvy South African traders are pocketing fast gains like 389%, 135% and even 52% in the global financial markets. You can find out how here…