Bitcoin At Risks of Falling as Global Market “Reckoning” Begins

• Bitcoin has rallied by more than 150 percent from its mid-March low of $3,858.
• But the cryptocurrency’s supersonic recovery risks fizzling out amid rising concerns about the next global market sell-off.
• A string of bearish macroeconomic catalysts, including quantitative tightening, could send Bitcoin price lower.

Bitcoin price may find itself amid a global market storm even as its underlying fundamentals look stronger than corporate stocks and government bonds.

The benchmark cryptocurrency sits at comfortable year-to-date profits, up 40 percent since January 1. Meanwhile, it’s crash from $10,500 to $3,858 during the first quarter sparked a brash wave of buying sentiment. Its rate is now up by more than 150 percent from mid-March lows.

Bitcoin price chart on TradingView.com showing its crash and imminent recovery since February 2020. Source: TradingView.com

But the profitability itself makes Bitcoin the first potential casualty in the event of a global market rout. Traders with positions in both the cryptocurrency and equity market tend to cover one’s losses by selling the other. The overall goal is to either cover margin calls or merely raise cash.

Like Bitcoin, the global stock market crashed to its yearly lows in March, only to recoup a significant part of their losses. While many veteran strategists expect the rally to continue higher – supported by trillions of dollars of stimulus policies by central banks and governments, others see a “reckoning” crash in the coming months.

In its latest report, Bloomberg encapsulated a string of alarming catalysts that could end the global stock market’s bullish euphoria. The media mogul noted that the second wave of virus infections, rising tensions between the U.S. and China, and faltering corporate earnings together points to a painful trading session ahead.

Quantitative Tightening

Meanwhile, looming risks of a no-deal Brexit, as well as the first signs of quantitative tightening by the Bank of England and the Federal Reserve, adds to growing worries about a global market plunge.

In retrospect, BoE Governor Andrew Bailey said on Monday that they plan to hike their lending rates before reversing their quantitative easing policy. The statement followed the central bank’s addition £100bn of stimulus atop its bond-buying target of £645bn for 2020.

Across the Atlantic, the U.S. Federal Reserve data showed that its balance sheet shrank 1 percent, or $74 billion, it’s most significant weekly drop since 2009.

“It is concerning how few tail risks are priced,” Jordan Rochester, a strategist at London-based Nomura International Plc, told Bloomberg. “The big one of which is policymakers potentially slowing down the stimulus. This past week we’ve actually seen the Fed’s balance sheet shrink.”

The Fed balance sheet shrinks for the first time since February 2020. Source: Twitter

A Bitcoin Price Crash

The confluence of all the risks, as mentioned above, may end the global market rally. As stated, a crash in the stock market could leave Bitcoin in a similar downside bias. Meanwhile, the demand for currency havens, such as the U.S. dollar and Japanese Yen, may head higher.

Preston Pysh, a prominent financial analyst, gave a similar outlook for Bitcoin, stating that the quantitative tightening may send the cryptocurrency down in the short-term. He explained:

“The event in March was a really good indicator [of] how powerful the dollar is right now. It will definitely impact all markets (in the short term) if the FED can’t manage the liquidity…which I suspect they will struggle to do as time progresses.”

The statement followed Bitcoin’s repeated failed attempts to close above $10,000. The cryptocurrency remains in a corrective downtrend while holding a technical support area between the levels of $8,600 and $9,300. Hardcore bulls, nevertheless, see it breaking above $20,000 – an all-time high – for its safe-haven features.

Veteran hedge fund tycoon Paul Tudor Jones in May called Bitcoin “the fastest horse” because of its ability to protect investors against inflation caused by central banks’ unlimited money printing tactics. Bitcoin has a maximum supply cap of 21 million tokens.

Since you’re here, feel free to try our cryptocurrency tracking and portfolio management tool.

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Analysis: How Bitcoin Would Fare against a More Brutal US-China Trade War

The relationship between the U.S. and China is on the verge of a breakdown. The global superpowers are battling each other on a range of geopolitical and macroeconomic issues – including trade, security, investment, Hong Kong, and the origins of the Covid-19 pandemic.

The risks of such a situation are evident. At worst, they could lead to a full-fledged military conflict. Even if Washington and Beijing manage to avoid a war, their 40-year long commercial relationship based on the idea of globalization could collapse.

The U.S.-China Trade War

The problem lies in the absence of mutual benefits. Former U.S. President Bill Clinton in 2000 prompted Congress to approve a so-called U.S.-China trade agreement, believing it would prosper Washington’s economic interests.

However, Mr. Clinton’s administration later accused the Chinese of failing to comply with global trade rules. For instance, Beijing gave limited access to its markets to the U.S. but became the biggest exporter of Chinese goods to the country. Meanwhile, Washington also accused the Chinese government of breaching copyrights and patent laws.

Years later, the current U.S. president, Donald Trump, reraised the issue, advocating tariffs to reduce the U.S. trade deficit and promote regional manufacturing.

Cumulative tariffs between China and the U.S. until October 2019 | Source: Statista

Under his tenure, the U.S. imposed four rounds of tariffs worth $550 billion on Chinese imports. The most recent taxation targeted electronics, meat, musical instruments made in China.

Meanwhile, Beijing responded with more than $185 billion worth of tariffs on U.S. goods.

Phase One Deal

On January 14, 2020, the U.S. and China signed a so-called “Phase One deal” at the White House.

The agreement witnessed Washington reducing duties from 15 to 7.5 percent on $120 billion worth of Chinese goods. Meanwhile, Beijing agreed to buy additional U.S. goods and services, costing about $200 billion until the end of 2022.

Covid-19 Pandemic

The trade deal hit a rough patch when a virus originated from a meat market in China’s Wuhan turned into a global pandemic. 

Trump accused his counterpart, the Chinese premier Xi Jinping, of blanketing the Covid-19 outbreak from the rest of the world. The virus to this date has infected 2.21 million Americans and has killed more than 119,000.

The noise was not merely political. In retrospect, the Covid-19 outbreak forced governments to announce extended lockdowns to contain the spread. That led to big economies, including the U.S., China, the U.K, Germany, Japan, India, entering recession.

The Chinese energy use collapsed during the first quarter of 2020 as a result of the lockdown rules, which led to a significant economic collapse. As a result, Beijing imported almost nothing in January, February, but a mere $320 million worth of U.S. goods in March.

ForeignPolicy.com called the phase one deal, “dead.”

The Phase One U.S.-China trade deal will not go into effect says former U.S. Ambassador to China Max Baucus. https://t.co/ji5s7NOuC2 pic.twitter.com/lwUCxUwtfS

— Bloomberg TV (@BloombergTV) June 17, 2020

On the other hand, Trump and other western economies have joined hands in mousetrapping China for an investigation into the origins of the Covid-19 pandemic. Beijing has pushed back to global pressure.

Bitcoin against Trade War

Over the years, people have speculated about the role of Bitcoin during a macroeconomic and geopolitical crisis. It is because the cryptocurrency exhibits the economic properties of Gold.

The rising trade war between the U.S. and China serves as an ideal hotbed for breeding the next generation of Bitcoin investors. 

The first notable thing to mention is the impact of the souring relationship between the two superpowers on financial gateways. For instance, China’s forced imposition of national security law in Hong Kong led top U.S. officials to threaten economic sanctions.

The impact grows louder on the financial sector that risks suffering extreme losses atop the bulldozing effect of the Covid-19 pandemic on the economy.

China GDP growth projections | Source: National Bureau of Statistics in China

China’s export-driven share has dipped from 36 percent of GDP to 20 percent. Those looking to set up their base outside the mainland may need credible tools to move their capital abroad even as existing financial routes decay. It may lead them to the safety of cryptocurrencies like Bitcoin.

Meanwhile, high barriers owing to trade war, coupled with aggressive quantitative easing practiced by the People’s Bank of China, would leave yuan in a weaker zone. In 2019, the central bank forcibly moved the currency lower to trade below $7 per yuan. Such devaluations could also allow investors to hedge their capital into Bitcoin.

Bitcoin and Yuan inverse correlation grew at the height of the U.S.-China trade war | Source: ARK

Billionaire hedge fund tycoon Paul Tudor Jones made this argument in his investment letter in May 2020, stating that he would hold Bitcoin because it reminds him of Gold from the 1970s. The yellow metal acted as a safe-haven during the financial crisis.

Finally, as worries over Covid-19 move businesses online, coupled with fiat devaluation owing to the massive money printing by central banks, people should start opting for solutions that fall outside the purview of both Chinese and U.S. government. The analogy may help Bitcoin becoming a de facto global currency.

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Three Reasons Why Top Crypto Bitcoin Can Still Fall Towards $6,000

Predicting Bitcoin price is no less than looking into a crystal ball. As the cryptocurrency leaves behind a trail of endless bullish and bearish fractals, it gives traders a grain of data to predict its next trend.

The reality remains the same: the Satoshi Nakamoto’s p2p cryptocurrency is an erratic asset. Its market is tiny, which exposes it to price manipulation, higher volatility, and low liquidity. One can merely guess where bitcoin would move next, not guarantee it.

So can the cryptocurrency fall to $6,000? Maybe. There are ample of recent market data that points to an imminent breakdown. At the same time, conflict theories also see bitcoin surging to $20,000 by the end of this year.

But let’s leave Bitcoin’s upside bias for another day and focus on the risks it represents after rallying by more than 150 percent since March 2020.

In retrospect, the cryptocurrency’s price surged from below $4,000 to a little above $10,000 in less than three months. Before that, it had crashed by more than 60 percent in just two days. So one can see why bitcoin remains a hugely volatile and erratic investment asset that can go anywhere between zero and a million dollars.

Traders, nevertheless, anticipated the price rally to break roofs above $10,000. They had and still have plenty of reasons to support their bullish bias, which include global central banks’ open-ended monetary policies, hyperinflation worries, and increasing bids for safe-haven assets amid an ongoing economic crisis.

Bitcoin performance over the last 6 months | Source: CoinStats

But despite every catalyst predicting a full-fledged bull run, bitcoin is struggling below $10,000. The cryptocurrency has repeatedly aborted its attempts to close above the said level. Even this week, it made one brief attempt at a breakout but fell short.

That brings us to a “crystal ball” price target of $6,000 – a level Bitcoin has tested both as support and resistance in the last three years. The cryptocurrency “could” fall towards it. And here are the reasons why.

#1 BitMEX

Ever noted how bitcoin’s attempts to close above $10,000 gets ripped apart by massive short liquidations at BitMEX, a Seychelles-based crypto derivatives exchange.

In a derivative market, traders place overleveraged bets – long or short – on bitcoin’s price movements in the spot market. It’s more like a betting game. If one bets its 1 dollar and takes up a 100x leverage on a bullish position, he can open a contract worth $100. It is called the margin.

Gambling as it is, if the spot price moves in the direction of traders’ position, they take home 100 times profit out of just a dollar. Meanwhile, if they lose, they lose the entire margin of $100. They then need to pay BitMEX to keep the position open after the contract expires or accept the losses.

As of late, derivative traders forcible liquidate their short (bearish) positions when the spot bitcoin hits $10,000. It happened on Wednesday, causing a $15 million worth of Short liquidations in just 30 minutes. The same thing happened last week, liquidating about $133 million worth of downside contracts when price closed above $10,000.

Mex OI pulling a MATIC out here.$BTC pic.twitter.com/1v9ozSH83R

— Hsaka (@HsakaTrades) June 7, 2020

BitMEX is a scary indicator. It played a crucial role in crashing the bitcoin price by 60 percent in March 2020. And its overleveraged trading could spell a bearish disaster, pushing prices down towards $6,000-support out of the blue.

A special note: Users can now track their bitcoin futures positions using our CoinStats portfolio management app.

#2 That Infamous Bitcoin Technical Analysis

The red bar in the chart below is the $6,000-support area. As one can notice, the range was instrumental in holding Bitcoin from extending its downside moves in 2018. Meanwhile, it also challenged bulls in 2019 for a while as they eventually broke the price towards $14,000.

The 200-WMA Support Target | Source: TradingView.com

The red-bar is not alone, anymore. It appears that it has got double-layered support in the 200-weekly moving average (the orange wave in the chart). The 200-WMA is sitting just near $6,000, as well.

If the BitMEX factor continues to play out, and spot traders fail to break above $10,000, bitcoin risks breaching a cascade of support levels to retest the red-bar-200-WMA combo. The orange wave is good at calling bitcoin’s bottoms, anyway.

#3 S&P 500 Correlation, Unemployment Data, etc.

The third and the final reason why bitcoin could drop to $6,000 deserves an introduction first.

Bitcoin and the U.S. benchmark S&P 500 crashed almost in sync in February and March. The fast-spreading coronavirus cases in the U.S. prompted the government to impose nationwide lockdown. That caused a market rout, sending every asset downwards but cash.

After the crash, the Federal Reserve intervened with an open-ended stimulus package worth $3 trillion. The U.S. central bank, meanwhile, slashed interest rates to near zero.

Fed’s quantitative easing, in addition to the U.S. Congress’s $3 trillion stimulus bill, helped the stock market recouping its 2020 losses entirely.

The stimulus also helped Bitcoin to register a remarkable recovery rally. Overall, a single common factor brought the price moves of Bitcoin and S&P 500 in sync.

But now the latter is looking to break lower.

The S&P pared its gains this week, accelerating downward as the Fed painted a gloomy outlook for the U.S. economy. The chairman Jerome Powell said that the job market may take years to recover from the coronavirus pandemic.

SPX turns red after Fed’s disappointing unemployment figures | Source: TradingView.com

That further led bitcoin prices lower, proving that the cryptocurrency could face more downside moves as the global economy deteriorates. That again put the pressure on $6,000, among the only targets that can reverse the downtrend.

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Is Pi Network a Scam or Legitimate Crypto Project?

Is Pi Network a crypto scam? Not yet.

Because a scam, as it sounds, requires criminal entities to mislead victims into putting their money in a fraudulent scheme. Scammers promise higher investment returns or rewards such as a yacht, a Mercedes Benz, or even a penthouse. But what they do is disappear with the money.

The Pi Network team has not done that yet.

But then there is a thing called “the potential scam.” One can interpret a firm’s action as shady in advance and decide not to invest in it altogether. While a little research could help people save their lifetime earnings, many still don’t add up the alarming signals.

So is Pi Network a “potential scam?” Not yet, again.

It is because its founders do not ask people to shell out money by promising them higher returns. They have merely developed a verified FREE app that users can download to mine a native token of the same name, Pi.

That’s all Pi is for now —a cryptocurrency, powered by all the little computational inputs it receives from its million flagship app downloaders. Pi is harmless.

How Pi Network Works

Launched in beta stage on March 14, 2019, by a group of high-profile Stanford scholars, the Pi network emerged as a poor man’s Bitcoin. It is because Bitcoin is a demanding cryptocurrency, requiring people to set up expensive rigs to run its blockchain network.

Pi App | Source: Play Store

But in the case of Pi, anyone can become a miner. Its network harnesses the power of users’ social networks instead of power-sucking computational machines. Each user that downloads the Pi Network app brings more users into the system using a unique passcode.

The process creates a web of trust between Pi users, wherein each member vouch for one another. That interlocks so-called “security circles” – clusters of members that determines who can validate transactions on the Pi ledger.

And each user receives rewards for their contribution in underlying Pi tokens. The Pi chain somewhat turns mobile phones into its mining rigs, ensuring low financial costs and – for a change – a much-much-much lesser carbon footprint than Bitcoin’s.

“Too many people are being left behind by the digital economy,” said Vincent McPhillips, Head of Community at Pi Network. “By pooling their time and talent around a common currency, Pi’s members are redefining the way ‘value’ is created and shared. Our dramatic growth proves there is a dynamic global community of people searching for new ways of establishing and controlling their worth.”

What is Pi’s Worth?

Pi, as a network, is growing because Pi, as a cryptocurrency, is practically free to own.

But users can’t spend it anywhere. No exchanges trade Pi for other valuable tokens, say Bitcoin or Tether. No merchant accepts it for goods and services. The crypto-token exists for the sake of existing.

Nevertheless, it is the promise of the greater Pi adoption that prompts users to mine it. That explains why more and more users are downloading the Pi Network app, leading to the ballooning of its community.

It sounds like a Ponzi scheme, except that users don’t pay a single penny to run the model. But there is still a promise of free money inscribed deep into the Pi team’s proposition. They expect to withdraw their tokens in the future – to use them as freely as the users of other cryptocurrencies do.

That puts Pi coin in a catch-22 situation. There is no economic model that defines its actual value. In contrast, the cost of mining one Bitcoin, at least, serves as a reference to its spot rate.

What is the value of something that can be attained for free? The Pi Network team will have to answer that. Read what one of its users say:

“The expected value can’t be determined. It depends on a lot of factors like demand and supply, news influence, etc. First, Pi coin needs to hit the market, and then we can talk about what the expected value is going to be.”

Meanwhile, The PIE Scam Confusion

Many observers, without any substantial proofs, claim that the Pi network is a scam. They can be anyone, ranging from community members of the rivaling cryptocurrencies to keyboard warriors who have not had the time to read the Pi whitepaper.

But there appears to be a third kind that confuses Pi with a similar branded PIE token. One ‘E’ can make a big difference in how people conceive a new cryptocurrency.

New Roadmap!! @Pie_Coin
Updates coming soon
On Yobit @YobitExchange
On C-Cex @CryptoCurrEncyX @CoinMKTCap @luanitalomdf
pic.twitter.com/U72Zg8YCJ0

— PIECOIN (@Pie_Coin) June 21, 2017

PIE, not Pi, is ICO-era crypto from late 2017. The project is dead, with less than $30K worth of market cap, and near-zero trading activity. It is one of those altcoins one should never hold.

A lookout for Pi sometimes lands people on a random PIE-is-scam webpage. There are also other active projects of the same doing rounds. One of them is also listed on CoinStats.

That said, the Pi Network seems wholly harmless and neutral – neither falling into a best-project nor the scam-project category. Traders can try the token out without wasting a sweat.

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