Altcoins boosted by BTC bounce as market recovers from possible forced-selling. DASH finds support ahead of April halving.
Bitcoin has held onto key support at the trendline mentioned in last weeks’ article, with a rally up to the $6,900 level. This has retreated overnight, due to another drop in stock futures after U.S. Democrats voted against the proposed stimulus package for the economy. Another vote is scheduled for 9:45 a.m. and the BTC support is still in play for now. Bitcoin actually did well to bounce last week with stock markets still in freefall from virus-induced selling. My assessment of this is that the cryptocurrency market has suffered from forced-selling. Much has been made over the last year regarding a growing wave of institutional investors into the space and the key beneficiary of those flows was BTC, which grew in dominance from 33% in early-2018 to become 70% of the entire sector’s valuation.
As markets have panicked over the last weeks, BTC has been treated as a “risky asset,” rather than a safe haven, but this is likely driven by hedge funds or other large investors who are taking profits, or seeking to raise capital in order to fend off margin calls. Margin calls are common in futures markets when an asset is going against your chosen market direction. Traders must hold a required level of funds in their trading account and in times of market stress, the exchanges can raise margin levels. As BTC continued to fall, the added pressure of margin calls adds to the selling, however, some traders could sell off BTC in order to fund margin calls in another product such as S&P futures or oil, both of which have been severely beaten down in the recent turmoil.
Once the dust settles for the financial markets, cryptocurrencies will also get a boost, but investors may be missing the point of the sector. As seen in the Cypriot financial crisis of…