The US stock market crashed as the Dow Jones Industrial Average (DJIA) fell 358 points in pre-market trading. Bitcoin (BTC) price fell to $ 10,374 on major exchanges, but a major pullback is unlikely.
One hour bitcoin price chart. Source: TradingView.com
Three main reasons could affect Bitcoin’s short-term sentiment. Possible catalysts are the probability of a Stimulus package, the strong technical response from BTC and the strong support level of $ 10,500.
As a result, a stimulus packet becomes more and more likely
Over the past month The Dow Jones struggled to rebound amid the resurgence of COVID-19 cases.
Various macroeconomic and political factors, including the US-China relationship and the stagnation of incentives, increased the index significantly.
Since the peak of September 2nd the Dow fell 4.4%according to Google Finance. Technology indices such as The SP 500 and the Nasdaq Composite posted larger losses of around 5.6%.
US President Donald Trump’s unexpected positive COVID-19 test shook the markets even more. Bitcoin price fell along with the Dow in the past 12 hours after President Trump tweeted:
This evening, @ FLOTUS and I’ve tested positive for COVID-19. We will start the quarantine and recovery process immediately. We’ll get through this TOGETHER!
– Donald J. Trump (@realDonaldTrump) October 2, 2020
Although the news initially caused the markets to crash, This could lead Republicans to reconsider the stimulus proposal.
October 1, House Democrats have officially passed a $ 2.2 trillion stimulus package, which includes direct stimulus controls. The Trump administration and Republicans opposed this, noting that the deal contained many unnecessary elements.
But if the presidential election approaches and markets collapse, it could push the Trump administration to work towards incentives. If a stimulus is approved, Bitcoin and the Dow are likely to skyrocket, which could add momentum for BTC.
Bitcoin is experiencing a strong technical correction
Bitcoin fell around $ 10,380 on Coinbase as the Dow lost more than 300 points in the pre-market session.
Since then, Bitcoin has recovered relatively strongly. BTC saw wicks below $ 10,400 on the lower timeframe charts but rose quickly above it. BTC is now consolidating below $ 10,500, which has been a critical level of support since early August.
A dealer known as “Benjamin Blunts“said BTC correlates more strongly with stocks than with gold. Taking into account the strengthening of the correlation when stocks rebound after the initial market reaction, could ease some pressure from Bitcoin. The dealer He said::
“I think once and for all we can all agree that #btc is not correlated to gold and is not correlated to stocks, no cutting and switching if it is our bias. So it is now”.
Correlation between Bitcoin and Gold. Source: Skew
The critical support level of $ 10,500
In the past two months, when Bitcoin consolidated just below critical support levels, it broke out historically.
$ 10,500 is an important level that could determine whether Bitcoin is moving towards the $ 11,100 to $ 11,300 resistance area or the $ 9,600 CME gap in the short term.
Traders suggest that too The BitMEX indictment may not turn out to be a long-term event. Galloping Clark, a cryptocurrency trader, wrote::
“In terms of order flow, I don’t see much of a difference between other LTF and Mex volume data exchanges, even though Open Interest has hit Mex for BTC. Practically still at the level of the standards. This won’t be an event? “”
Analysts who believe the BitMEX incident will have less of an impact on Bitcoin in the short term and that BTC will return to the $ 10,500 support range, Maintaining an optimistic medium-term outlook for BTC.