Bitcoin has pulled back sharply from 16-month highs reached early Wednesday alongside heightened coronavirus-induced risk aversion in global stock markets.
- At the current price of $12,980, the top cryptocurrency by market value is down over 5% on the day and 7% from the Asian session high of $13,857. That was the highest level since June 2019, according to CoinDesk's Bitcoin Price Index.
- The cryptocurrency looked overbought and vulnerable to minor pullback early today, having rallied by over 20% this month alone.
- However, the pullback's magnitude is likely being amplified by the losses in the global stock markets.
- Wall Street's benchmark equity index S&P 500 is down over 2% at press time, and the pan-European Euro Stoxx 50 index has shed 4%. Meanwhile, the anti-risk sentiment is boding well for haven assets like the U.S. dollar, Japanese yen, and U.S. Treasury bonds.
- The dollar index, which tracks the greenback's value against major currencies, is up over 0.5% at 93.50, while the U.S. 10-year yield is down nearly three basis points.
- However, gold, also a haven asset, is struggling to draw bids and is trading at $1,876, down 1.7% on the day.
- Risk appetite has weakened as the second wave of the coronavirus is accelerating across Europe and in the U.S. and threatening to derail the fragile global economic recovery.
- According to Reuters, France and Germany are preparing to reimpose economically painful lockdown restrictions.
- While the possibility of bitcoin extending losses on continued risk aversion cannot be ruled out, fundamental metrics like the market value to realized value Z-score indicate the broader trend for the cryptocurrency is bullish.
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