The Month When Bitcoin Experienced the Biggest Blow in the History of Its Existence

Since the beginning of the month of March 2020, Bitcoin has fallen by a staggering 50% and everyone is probably wondering where did such an impulse drop come from? We must first focus on the global economy. The world monetary system has been doing very poorly in recent years so it was only a matter of time before such a fall in the world stock market, where the main index of the US Stock Exchange fell by 30% in a month, will occur. Most people think that the coronavirus is responsible for such a stock market crash and the fall of the global economy, but an even bigger number of people disagree. It seems more like the coronavirus was just the trigger for the stock market crash.

Now you’re probably wondering why Bitcoin has fallen so much? The reason is very simple — investors in Bitcoin saw the global stock market collapse, and they were overwhelmed by fears and a massive sell-off of Bitcoin, that led to such an impulse fall, happened. Quite a lot of people have started writing about how Bitcoin is dead, but this is very far from the truth.

What Do Specialized Tools Show?

There’s one indicator that those who participate in Bitcoin trading platforms especially value as authoritative — the RSI (Relative Strength Index). It’s the oscillator, which monitors both the current and historical strength and weakness of a particular market on a weekly basis. And, when it comes to Bitcoin, it’s currently looking good.

After that impulse fall in March, Bitcoin’s RSI was below 40 for the whole week, which indicates that it’s a negative market but immediately returned above that zone the following week. The zone between 40 and 53 on the RSI is called the neutral zone and that’s where Bitcoin is currently located. By breaking through 53, Bitcoin is returning to a positive market. Unless we see a new major drop in the global stock market, we can expect Bitcoin in a positive market during April/May.

How Did Bitcoin Behave in a Crisis?

The initial idea of Bitcoin was to act as a safe haven or guardian of value during a crisis, the same as gold. We have seen the stock market crisis, but we haven’t seen Bitcoin act as intended. You are probably wondering why? The answer is very simple — if we compare gold during the previous crisis of 2008, we can see that it behaved as Bitcoin behaves now. While the stock market continued to decline, gold also fell sharply but it started to recover heavily before the world stock market. And when the world stock market started to recover, gold had the largest bull market in its history.

Can we see a similar scenario on Bitcoin? Very likely, yes. We have already seen a jump of over 80% on Bitcoin from bottom to $3,800, while the world stock market has only recovered by 8-10%. For now, Bitcoin is doing the same thing gold did in 2008. If history repeats itself, there’s a good chance we may see another big bull run on Bitcoin.

The Fall of Bitcoin Compared to Other Cryptocurrencies

We see that all cryptocurrencies have had a pretty ”red” month. Bitcoin dropped to over 30% while Ethereum, EOS, Litecoin, and most other major cryptocurrencies fell by nearly 50%. NEO, Cosmos, and Tezos accounted for the largest fall in percentages with over 50% losses. Bitcoin dominance rose from 62% in February to 66% in March.

The index of fear and greed, using different input parameters, shows sentiment in the Bitcoin market. Given that the index is at 12, this represents an extreme fear among investors. The index dropped to 9. Each time the index came at such low values, large jumps were seen and often complete reversals of the trend. We’ll see what will happen this time.

Image courtesy of QZ.com