Bitcoin is approaching a critical stage of its current market cycle as it continues to languish around at the stubborn $9,000 level of support.
The world’s largest cryptocurrency has enjoyed six weeks of relative calm compared to the start of the year, with Bitcoin having rallied all the way to $10,500 in February before capitulating to as low as $4,000 in the following month.
A major move of similar velocity may be on the cards in the coming weeks as the US stock market, which is seemingly correlated to Bitcoin, is expected to plunge on fears of a Coronavirus second wave.
The pandemic and its subsequent lockdown led to fears surrounding the global economy, which is what cause March’s biggest market crash since the 2009 financial crisis.
A second wave would reignite fears on the economy with lending and quantitative easing already at shockingly high levels.
As national debt mounts so will the temptation to send all citizens back to work, but this may be a double-edged sword as it could lead towards more a devastating financial downturn later down the line.
Bitcoin can react to this event in a number of ways, the first of which is what it was arguably designed for, being a hedge against the traditional financial system.
If the markets and global currencies begin to fall, many may seek safe haven assets to preserve their capital, this has typically been gold but some may turn to Bitcoin as the digital age becomes more prevalent.
Another scenario, which at the moment seems most likely, would be if Bitcoin falls in unison with the stock markets as a result of its correlation in 2020.
This correlation is likely due to investors liquidating all assets into fiat out of fear, whether they be stocks, bonds, cryptocurrency or precious metals.
In the short-term Bitcoin needs to break out above $10,500 to trigger a bullish reversal, although it needs to continue closing daily candles above $8,830 to prevent a bearish switch of narrative.
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In August 2008, the domain name bitcoin.org was registered. On 31st October 2008, a paper was published called “Bitcoin: A Peer-to-Peer Electronic Cash System”. This was authored by Satoshi Nakamoto, the inventor of Bitcoin. To date, no one knows who this person, or people, are.
The paper outlined a method of using a P2P network for electronic transactions without “relying on trust”. On January 3 2009, the Bitcoin network came into existence. Nakamoto mined block number “0” (or the “genesis block”), which had a reward of 50 Bitcoins.
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