Wall Street had one of its worst days on Thursday. Analysts call it one of the most brutal sell-offs. The Dow Jones Industrial Average Index or DJX lost more than 1,861 points.
The fate of BTCUSD was no different. Over twelve hours, Bitcoin dropped almost 9.5%. The same was the situation with most other Altcoins such as ETHUSD, XRPUSD, etc.
Why did markets drop so much and how it affected BTCUSD?
The sell-off that happened yesterday was one of the worst since March. The US Federal Reserve suggested that interest rates would be kept low till 2022. That was an indication of how difficult a situation the economy is facing!
Investors had colossal losses in March. They are yet to recover from those losses. And as soon as they felt that losses could increase, they panicked. Bitcoin, being one of the riskiest assets, saw a sell-off for apparent reasons.
Factors that led to the massive drop in BTCUSD
Published on: TradingView.com
The four-hour timeframe for BTCUSD shows that out of the last six trading sessions, five of them ended in the red. Let us delve into the reasons that caused this crash:
- In Financial Markets, there is a theory called the Efficient Market Hypothesis. It says that markets account for every positive and negative news. However, what the market fails to account fully is uncertainty.
- Currently, both the stock markets and the BTCUSD market are in a period of ambiguity. Despite the Coronavirus pandemic still prevailing, markets rose like crazy since March. And as soon as the US Federal Reserve came up with such an announcement, the market was confused. Confusion gives rise to panic, and that caused the sell-off in Bitcoin.
- The first wave of Coronavirus left several people dead. Cashflows dried up, and businesses shut down. Now there is a fear of another wave of infection. People cashed out their BTCUSD holdings while they could.
- Lastly, the Technical indicators pointed to a big move in Bitcoin. It was in the consolidation phase for quite some time.
- The RSI dropped almost vertically. MACD had a substantial downward crossover. Moreover, the rise past $10,000 drew several profit-bookers. Different sources thus fueled the selling pressure in BTCUSD.
It might be prudent to invest 30% of the capital in BTCUSD at this point. If there is a further decline, one might think about investing another 30%-40%. Once the market recovers, it will surely pay-off.
