One lesson of this week’s oil-price crash is that markets aren’t acting very efficiently during the coronavirus crisis.
On Monday, the benchmark U.S. oil futures contract for May delivery tumbled to an unprecedented negative price, largely because storage tanks are full of a product few can use. How that surprised experienced oil traders might seem a mystery, since energy companies and Texas state officials had been warning for weeks that storage capacity was running out.
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Commentators quickly pointed out the price anomaly was limited to the May contract; the futures contract for June delivery, after all, was still trading above $20 a barrel – a better reflection of oil’s true price. “Technical factors explain some of the decline,” the New York Times wrote. “Oil watchers don’t consider it the most accurate reflection of price action,” the Wall Street Journal wrote.
Then on Tuesday, that narrative proved fanciful when the June contract tumbled more than 43 percent to a 21-year low of $11.57 a barrel. The May contract settled at $10.01.
The only news was the price discovery: It turns out oil is worth a lot less now than it was at the start of the week, or in early April when it traded closer to $30 a barrel.
The takeaway for bitcoin traders is there might be a lot of factors in cryptocurrency markets that are known but not really reflected in the price.
Those could include the deflationary impact of the coronavirus-induced global recession and the potential inflationary forces of the Federal Reserve’s trillions of dollars of emergency money injections. Another might be the upcoming miner…