What status for the Bitcoin (BTC) price in the current stock market shock?

The Bitcoin (BTC) price finally broke the $ 8,500 support, but in a volume and an open position clearly decreasing. What is the good interpretation ?

Key technical factors of the article:

• The bitcoin price has lost 20% since the start of the stock market shock linked to Covid-19, after having gained 50% over the previous two months. What is the status of BTC in the event of an increase in the volatility of the equity market?
• The breaking the $ 8,500 is technically negative, the configuration has weakened with the downward gap in the future BTC contract; but there remains one last support.

Bitcoin was presented by some as a financial asset in the aspect " refuge », Like the Japanese Yen on Forex, sovereign quality credit or precious metals. The reality is different because during the stock market shock, CAC 40 drop of 25% between February 19 and March 9, BTC also dropped 20% (after gaining 50% in the previous two months, it should be noted).

What happened in terms of capital? The study of the daily volume on the BTC and the evolution of the open position on CME Bitcoin futures (see histogram below) show that the overall stock of buy and sell contracts has decreased quite markedly over the past 3 weeks. This phenomenon has also been observed on the price of gold and silver-metal. This unwinding of global positions allowed traders in difficulty on the equity market to obtain liquidity to cover margin calls.

Therefore, the crypto market was used as a kind of liquidity reserve to mitigate the fall in stocks.

This reality is both positive and negative: positive because the recent decline in BTC was done in a very small volume and for a non-intrinsic reason; negative because being perceived at the margin as a liquidity reserve shows that the asset class of cryptos still lacking a structural dimension on the financial markets.

Let's talk now Bitcoin price technical analysis. The market had managed to preserve the support at $ 8,500, which was broken thanks to a bearish gap on the future CME contract.

Bitcoin future contract – Tradingview

The break of $ 8,500 weakens the general graphic configuration. The extreme dimension of the resistance at 10K / 10.3K $ is known and the support at $ 8,500 could serve as a support for a new test. The rebound was limited to $ 9,200 and the 8.5Ks gave way thereafter.

Technically, there is only support left for the BTC, the chartist trend line of the year 2019, the same one that participated in the market rebound last December. It goes up to $ 7,600 and was tested yesterday. The BTC is trapped between this bullish technical slant and the (new) resistance at $ 8,500 according to the polarity change scheme (an old broken support becomes a resistance).

Here are the 3 possible market cases:

• CASE 1: neutral phase between the trend line ($ 7,600) and the resistance at $ 8,500
• CASE 2: abrupt break in the trend line and return to the December lows ($ 6,500)
• CASE 3: exceeding the resistance at $ 8,500 and bullish counterpoise towards $ 10K

Bitcoin price – tradingview

Conclusion : Which market case should be favored? Objectively, this is equally probable. However, we all have subjective biases, personal convictions and money management in trading. As for me, I believe in the high potential of the blockchain and its flagship application, BTC and the declines seem to me to be medium / long term opportunities.

Follow Vincent Ganne on Trading View for further analysis on the financial markets. The technical thresholds and the trend indicated above are based on the technical approach "price, momentum, sentiment, ichimoku". The data come from Bitstamp and the graphics of TradingView. You can consult the history of our technical points on cryptocurrencies in click here.

This content is offered for informational purposes only and does not constitute an investment recommendation. We remind you that theinvestment in crypto assets, including Bitcoin, is extremely risky. Cryptocurrency prices are prone to large and unpredictable price movements.