Bitcoin Ekes Out Gains but Remains in Red Amid Broader Market Rebound

Bitcoin (BTC) recovered slightly from Thursday’s brutal selloff as global financial markets creep back into the green.

After dipping below $4,000, the world’s leading cryptocurrency posted some gains and is currently trading at $5,431 as of 20:00 UTC Friday. While bitcoin is still down 15 percent over the last 24 hours, traders started buying after it hit a 12-month low of $3,855 around 02:00 UTC on Coinbase.

On the one hand, the timing of the turnaround supports the notion that bitcoin is more correlated with traditional markets than its advocates have long believed.

“The rally from the low coincided with a turn in the equities market,” noted Max Boonen, CEO of B2C2, a London-based over-the-counter (OTC) market maker.

Indeed, Japan’s Nikkei 225 Index chart shows green candles, a sign there are more buyers than sellers, appearing at 02:00 UTC, around the time of the buying on Coinbase. Equities in other markets are seeing gains, as in the U.S. the S&P 500 is up 9 percent as of 20:00 UTC.

On the other hand, the U.S. Federal Reserve's New York branch announced a $1.5 trillion injection of cash into the financial systems Thursday, and that news had traders thinking bitcoin still has major potential as an inflation haven even though in trying times cash and a steady diet of government bonds seems to be what people want.

“Eventually, as QE washes the globe with more fiat, BTC will come into its own. The fundamental reason why BTC exists is even more strong now,” said Jack Tan of algorithmic trading firm Kronos Research, referring to the quantitative easing policies employed by central bankers since the 2008 financial crisis.

Cryptocurrency whales, those with large stakes, seem to be moving coins around more often than usual, as Binance saw 1,702 BTC of inflows March 8 while bitcoin’s price was still up near $8,000. Since then, a tumble downward has left bitcoin in a $4,600 to $5,900 range, and some are salivating at a buying opportunity.

“Traders of all types - institutional, prosumer, retail and everyone in between - are taking advantage of value investing opportunities in an oversold market that is fundamentally sound and ripe for recovery in the not-too-distant future,” said Denis Vinokourov, head of research at Bequant, a London-based digital asset firm.

Trading in other leading cryptocurrencies, such as ether (ETH), down 6 percent, and XRP (XRP), in the red 6 percent over the last 24 hours as of 20:00 UTC, indicates uncertainty is still the name of the game.

“We expect prices to recover, though the current geopolitical environment and evolving coronavirus outbreak make the timing and size of that recovery a bit uncertain,” Bequant’s Vinokourov added.

Traders always struggle to time the market, and cryptocurrencies are notoriously volatile. They want to buy in at these prices, but are keeping a close eye on bitcoin’s gyrations.

Henrik Kugelberg, an active OTC trader based in Sweden, is busy making cryptocurrency purchases. However, he cautioned that U.S. President Donald Trump’s often mercurial decision-making could throw a spanner in the works.

“I bought some more today. However, Trump’s cards have not all been seen yet, so it is likely we’ll see another [bitcoin] drop,” Kugelberg said.