Bitcoin (BTC) is again feeling the pull of gravity as investors offload risk in traditional markets despite the massive U.S. stimulus package this week.
The top cryptocurrency by market value is currently trading near $5,050, having failed to establish a strong foothold above $5,500 late Tuesday., according to CoinDesk's Bitcoin Price Index.
Prices were better bid 24 hours ago when global equities were flashing green. Sentiment, however, soured during Wednesday's Asian trading hours and futures tied to the S&P 500 fell by 5 percent, triggering a "limit down" – the maximum percentage decline possible in one trading day.
Asian equities also put in a weak performance, providing negative cues to the major European equity indices, which are currently down at least 3 percent.
“Global equities markets continue to reject stimulus efforts put forward by the U.S., with the S&P 500 recording its largest one day drop on Monday since 1987," said Matthew Dibb, co-founder and COO of Stack, a provider of cryptocurrency trackers and index funds.
See also: Why Bitcoin Is the Only Truly Free Market, Feat. Dan Tapiero
The U.S. Federal Reserve delivered an emergency rate cut of 100 basis points early Monday and announced new quantitative easing in the form of at least $700 billion in asset purchases. Further, the Trump administration said Tuesday it's planning to send checks directly to U.S. citizens as part of a $1 trillion stimulus program.
Even so, the stock markets are flashing red, which likely indicates investors are worried that monetary easing will not spur economic activity. After all, the threat to global supply and demand is not being caused by institutional systemic failures but by measures related to the growing coronavirus pandemic.
As a result, a sustainable price recovery in both stocks and bitcoin may remain elusive until there is a stabilization in the coronavirus infection curve.
"However, if the impact of the coronavirus outbreak intensifies beyond the global lockdown we are already experiencing, it could spark a further run for cash," Simon Peters, analyst and crypto-asset expert at multiasset investment platform eToro, told CoinDesk.
Should that happen, investors may again look to bitcoin as a source of liquidity, leading to another wave of selling.
Bitcoin is currently consolidating, showing indecision in the marketplace, said Peters. That seems to be the case as the cryptocurrency is stuck in a triangle pattern on an intraday chart.
4-hour chart
4h-2
Bitcoin has carved out an ascending triangle that comprises two trendlines – a horizontal line connecting price resistance and a rising trendline joining higher lows.
A four-hour close above the upper edge of the triangle, currently at $5,945, would open confirm an ascending breakout and open the doors for $6,425 (December low).
However, if the lower end of the triangle at $4,865 is breached, more sellers may join the market, yielding a re-test of recent lows under $4,000.
Daily chart
btc-d-2
The 14-day relative strength index is signaling oversold conditions with a below-30 reading, while the MACD histogram is producing higher lows below the zero line, a sign of weakening bearish momentum.
A triangle breakout on the 4-hour chart, if confirmed, could be followed by a quick rally to $6,000.