The cryptocurrency remained bid even as the U.S. equities began Q2 on a weak note with the S&P 500 falling 4 percent. Investors shunned risk as President Trump’s stark warning on the coronavirus pandemic raised the specter of a prolonged shutdown and deeper economic recession.
- Historical data suggests bitcoin could put in a positive performance in the second quarter.
- Bitcoin is currently trapped in a pennant pattern on the daily chart. A breakout will likely yield a rally toward $8,000.
- A pennant breakdown would put the bears in a commanding position and open the doors to $5,000.
Historical data shows bitcoin has put in a positive performance in six out of the last eight years, as seen below.
Sellers had an upper hand in the second quarter of 2013 and 2018, but the losses were restricted to single digits. The 161 percent rally seen in the second quarter of 2019 is the third biggest quarterly gain on record.
Many analysts are of the opinion that the massive money-printing efforts recently announced by global governments and central banks amid the Covid-19 crisis could boost bitcoin’s appeal as an inflation hedge.
And, while it’s far from certain, the mining reward halving – the programmed-in 50 percent reduction in rewards for bitcoin miners due in May – may put upward pressure on prices. “A bitcoin emission cut of 50 percent is a fundamentally bullish even,” said Connor Abendschein, crypto research analyst at Digital Assets Data.
So bitcoin may repeat history by ending the April to June period in the green. Gains, however, may remain elusive if stock markets see another massive price sell-off, again triggering a liquidity crisis like we saw last month. In that case, investors will likely stay away from the crypto markets.
With the virus outbreak showing no signs of slowing down, the possibility of a deeper stock market crash shouldn’t be ruled out. “The impact of the coronavirus on economies will not be over quickly because there’s been a lot of damage. A gigantic amount of debt has been added and another stock market rout looks imminent,” said veteran investor Jim Rogers.
From a short-term perspective, the cryptocurrency appears on track to extend the recent rally from lows under $4,000.