Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases and a key member of the White House Working Group on Coronavirus, says this The number of daily infections in the US could reach 100,000 a day if precautions are not taken immediately to prevent the virus from spreading.
When Fauci issued this warning, the actions reacted with caution;; Investors believe that a decline in equity markets can lead to a correction in the Bitcoin price (BTC).
Fauci also warned of this An effective vaccine may not come as quickly as the medical community expects. On July 1st, he said:
“There is no guarantee that … we have a safe and effective vaccine … I am very concerned that this could be very bad.”
In the past few months, Bitcoin’s price has reflected that of US stocks If longer restrictive measures trigger another sale of risky assets, BTC could be vulnerable to another major withdrawal.
BTC USD against SP 500. Source: Skew.com
Investors in the traditional financial market are just confused
Largely, Most institutional investors in the US and Europe remain cautious on equities. At the beginning of June, FT reported that hedge funds were preparing for a stock market crash. Some large hedge funds, including Fasanara Capital, had up to 70% of their holdings in cash.
The unpredictability of the pandemic has forced investors with high purchasing power to be skeptical about stocks. And if the new virus data deteriorates further, investors may take refuge in risky assets.
For Bitcoin due to the high correlation with stocks since March A stock market crash could lead to a decline in the cryptocurrency market.
Bitcoin recovery since March 13th. Source: TradingView.com
The market is at a point where top-class strategists struggle to assess economic and corporate data. Lori Calvasina, head of equity strategy at RBC Capital Markets, said:
“The numbers are everywhere.”
While strategists are unsure of the short-term trend for stocks, The demand for cash and secure assets is increasing.
According to the Federal Deposit Insurance Corporation (FDIC), bank deposits increased by USD 2 trillion during the pandemic. This indicates that Investors are moving further and further away from high-risk assets to reduce the risk.
Brian Foran, analyst at Autonomous Research, said:
“Many banks say: ‘To be honest, we can’t do much with it right now.’ They have more deposits than they know what to do with them. “
The steadily increasing appetite for cash and declining demand for risky assets can lead to a crash in the Bitcoin market..
Despite all the money in the market, Bitcoin is not recovering
Not only the traditional financial market is seeing an increase in cash savings. Tether (USDT), the dominant stable coin in the cryptocurrency market, has recently reached a market cap of over $ 10 billion.
Depending on how the data is interpreted, Tether’s sharp rise in valuations can mean a capital increase that is marginally waiting for Bitcoin.
Despite the increasing amount of money in the financial market and in cryptocurrencies, both stocks and Bitcoin have consolidated in recent months. Shares and crypto assets fell at the same time almost immediately after the Federal Reserve’s balance sheet shrank.
The trend indicates that investors are waiting for additional economic data and a better understanding of how the US economy will respond to the resurgence of the coronavirus.
The reluctance of market participants to commit to risky assets could lead to increased selling pressure on BTC short term.