Lately, a great deal of attention has been focused on the correlation between Bitcoin and the S&P 500, meaning crypto traders need to keep track of the fundamentals of the equity markets. Global markets continue to be negatively impacted by the coronavirus pandemic and according to a report from the International Monetary Fund, the resulting lockdown in several countries will lead to one of the worst contractions in 90 years.
According to the IMF, “even if the spread of the virus peaks in the second quarter for most countries in the world, and recedes in the second half of this year” the global economy will witness a 3% recession year-over-year.
As a comparison, the previous financial crisis in 2008 had clocked only a moderate 0.1% drop in GDP growth year-over-year.
Daily cryptocurrency market performance. Source: Coin360
Usually, the expectation with such a negative forecast is a sharp fall in equity prices. However, the investors have already been expecting a sharp slowdown. Therefore, these stark warnings might only see a short-term knee-jerk reaction. The markets are likely to be more concerned about the rate of recovery after the slowdown ends. If the expectation is that the economy will spring back quickly, the equity markets might not break below their recent lows.
Even if the high correlation between Bitcoin and the S&P 500 remains intact in the short-term, a sharp fall below $5,000 level looks unlikely. As the spread of the coronavirus slows down and the world tries to limp back to normalcy, Bitcoin is expected to chart its own course driven by its fundamentals.
Therefore, investors could choose to not to be too bogged down by the performance of equities markets and only use them as a reference.
Let’s study the charts of Bitcoin and the major altcoins to determine the path of least resistance.
The bears have not allowed Bitcoin (BTC) to rally above the 50-day simple moving average for the past few days. This is a negative sign as it shows that the bears are in command. They are currently attempting to sink the price below the 20-day exponential moving average ($6,840).
BTC USD daily chart. Source: Tradingview
If the BTC/USD pair sustains below the 20-day EMA, it will signal weakness. With the 50-day SMA sloping down and the relative strength index gradually turning down, the bears have a slight advantage. The immediate support is at $6,553.21 but if this fails to hold, the decline can extend to $5,660.65.
Conversely, if the bulls buy the current dip, we anticipate another attempt to scale the price above the 50-day SMA ($7,033). If successful, a move to $7,454.17 and $8,000 is possible.
We anticipate the pair to start a decisive move within the next few days. For now, traders can protect their long positions with a stop loss of $5,600.
Ether (ETH) continues to trade between both the moving averages, which are converging. This shows that volatility has dropped but this is unlikely to continue for long. We anticipate a sharp move within the next few days.
ETH USD daily chart. Source: Tradingview
If the bears sink the ETH/USD pair below $149, the follow-up selling can drag the price to $135 and below it to $100. Therefore, the stop loss on the long positions can be kept at $135.
On the other hand, if the pair turns around from the current levels, the bulls will try to propel the price above $176.103. If successful, an up move to $208.50 and $250 is possible.
The bulls are struggling to keep XRP above the 20-day EMA ($0.184), which is a negative sign. The 50-day SMA ($0.188) continues to slope down and the RSI is also gradually moving lower. This suggests that the bears are attempting to tilt the advantage in their favor.
XRP–USD daily chart. Source: Tradingview
A break below $0.175 will be a negative sign as it will increase the possibility of a drop to $0.15708. This is the critical level to watch out for because, below this level, a retest of the recent low at $0.114 is possible.
Conversely, if the XRP/USD pair turns around from the current levels or from one of the support levels and rallies above the recent swing high of $0.20570, a new uptrend is likely. Hence, the stop loss on the long positions can be retained at $0.155.
Bitcoin Cash (BCH) has been sustaining below the 20-day EMA ($233.51) for the past two days, which is a negative sign. This shows that the bulls are not confident buying even at these levels.
BCH–USD daily chart. Source: Tradingview
The BCH/USD pair can now drop to $200 and if this level cracks, the decline can extend to $166. With both the moving averages sloping down and the RSI in the negative territory, the advantage is with the bears.
As the trend looks bearish, we suggest traders close half of their long position at the current levels and keep the rest with the stops at $197.
Our bearish view will be negated if the pair turns around from the current levels and rises above the $250-$280.47 resistance zone. Such a move will open the gates for a rally to $350.
The volatility in Bitcoin SV (BSV) has dropped sharply in the past few days. This shows that traders are not clear about the next move, hence, they are not placing any large bets in either direction.
BSV–USD daily chart. Source: Tradingview
However, this state of confusion is unlikely to remain for long. Within the next few days, there could be a large thrust in either direction that can result in a directional move.
As the moving averages have completely flattened out and the RSI is also at the midpoint, it is difficult to predict the direction of the breakout.
If the bulls make the first move, they can carry the price to $227 and above it to $268.842, which is the 61.8% Fibonacci retracement of the recent decline. Conversely, if the bears force a breakdown, a drop to $146.20 is possible. Therefore, the traders can maintain the stops on the long positions at $165.
Litecoin (LTC) has been trading below the 20-day EMA ($41.94) for the past two days. This is a negative sign as it shows a lack of buyers even at these levels. The altcoin can now drop to the next support at $35.8582.
LTC–USD daily chart. Source: Tradingview
The 50-day SMA ($44.82) continues to slope down and the RSI is gradually dropping lower. This suggests that the bears have the upper hand. A break below $35.8582 will be a huge negative, hence, the traders can hold their long positions with stops at $35.
Before surrendering to the bears, the bulls might make one last attempt to defend the support at $35.8582. If successful, the LTC/USD pair is likely to remain range-bound between $35.8582-$43.67 for a few more days. The pair will pick up momentum after it climbs above $47.6551.
EOS has been trading close to the $2.4001 level for the past few days. The 20-day EMA ($2.47) has flattened out but the 50-day SMA ($2.65) continues to slope down. The RSI has dipped below the 50 levels, which shows that the bears might be at a slight advantage.
EOS–USD daily chart. Source: Tradingview
A break below $2.4001 will indicate that the bears have made their move and a drop to $2.0632 is likely. If this support also cracks, a drop towards the recent lows at $1.42 is possible. Hence, the traders can retain the stops on the long positions at $2.
Conversely, if the EOS/USD pair bounces off the current levels or $2.0632, the bulls will make another attempt to push it above the recent swing high of $2.8319. If successful, a new uptrend is likely.
Binance Coin (BNB) climbed above the 50-day SMA ($14.77) on April 13 and followed it up with a move above $15.49 on April 14. This should have cleared the path for a move to $17.50 but the bears are not relenting.
BNB–USD daily chart. Source: Tradingview
The BNB/USD pair has pulled back to the moving averages, which are on the verge of a bullish crossover. We anticipate this level to act as a strong support. If the pair bounces off this support, it is likely to resume its journey towards $17.50.
If the momentum picks up and breaks above $17.50, the next target to watch out for on the upside is $21.50. The traders can trail the stops on the long positions to $13.
A bullish view will be invalidated if the bears sink the price below the breakout level of $13.65. Such a move will indicate that the markets have rejected the higher levels and a drop to $11.2552 is likely.
The range continues to shrink as Tezos (XTZ) is largely stuck between both the moving averages. This tight range trading could lead to a sharp directional move within the next few days.
XTZ–USD daily chart. Source: Tradingview
A break below the 20-day EMA ($1.88) will be a huge negative as it can drag the XTZ/USD pair to $1.65. If the downward momentum is strong, a drop to $1.4453 is also possible. Such a move will signal that the breakout above $1.955 was a bull trap.
Contrary to our assumption, if the pair dips just below the 20-day EMA but then quickly reverses direction and rallies above the 50-day SMA ($2.03)-$2.185 resistance zone, it will signal an advantage to the bulls. For now, traders can retain their stops on any long positions at $1.40.
Chainlink (LINK) has turned down from just above the 61.8% Fibonacci retracement level of the recent drop. This shows that the bears are unlikely to give up without a tough fight.
LINK–USD daily chart. Source: Tradingview
The LINK/USD pair is likely to take support at the moving averages, which are close to each other. If the pair rebounds off this support, the bulls will make another attempt to scale the price above $3.6412.
If successful, a rally to $4.9762 is possible. The bears might pose another challenge at $4.2023 but we expect this level to be crossed.
Contrary to our assumption, if the bears sink the pair below the moving averages, a drop to $2.50 and $2 is possible.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Market data is provided by HitBTC exchange.