Investors will be watching Bitcoin, amid growing coronavirus fears, a possible slowdown in global economic growth and political uncertainty in the UK and EU.
Context: Bitcoin dipped to below the $10,000 mark over the weekend, after having surged from around $7,200 at the beginning of the year. The benchmark cryptocurrency has been in focus as investors seek “safe haven” options amid the economic impact of the coronavirus outbreak. The coin is also considered as a hedging tool against geopolitical risks.
Details: Early last week, Bitcoin rose above $10,000, reaching a 5-digit figure for the first time since September. By Wednesday, the leading cryptocurrency was trading above $10,330. This marks a significant rise not only from December 2019, when the coin reached below $6,700, but also from below $3,200 reached in December 2018.
Why it matters: The sell-off over the weekend came after Bitcoin traded above $10,300 for an extended period and may have been driven by profit taking rather than bearish sentiment.
Some analysts note the bear case for Bitcoin as investors prefer the US dollar and precious metals as “safe haven” assets. The greenback has been strong this year, up 3.5% against the euro year to date. The US dollar index has gained 2.84% year to date. Gold gained around 1% last week, with silver also ending the week higher.
Analysts who are bullish about Bitcoin highlight that the greenback has been supported by the highly positive earnings season among US stocks, most economic data indicating resilience in the world’s largest economy and expectations of interest rate cuts by the Fed to counter the impact of the coronavirus on the US economy.
Bitcoin trading has been on the rise this year, with exchanges offering state-of-the-art technology, built-in fiat gateways, faster KYC verification and deeper order books, which reduces spread and slippage. Moreover, trader response has also become increasingly premeditated rather than being driven by sentiments like FOMO and anxiety.
What to watch: Investors will closely monitor the impact of China's coronavirus on the global economy. Any news of a rise in coronavirus toll and confirmed cases may support Bitcoin. Traders may take cues from the Fed and EBC minutes, scheduled to be aired later this week, for further insight into the economies. For Bitcoin, $9,700 is considered as a key support level.
Other Markets: US indices closed mixed on Friday, with the Dow down 0.09%, while the S&P 500 rose 0.18% and the Nasdaq gained 0.20%, respectively.