Markets are taking the U.S. Federal Reserve’s less-than-optimistic economic forecasts quite hard, and that’s leading crypto traders to hit the sell button.
Bitcoin (BTC) was trading around $9,258 as of 20:00 UTC (4 p.m. ET), slipping 6.4% over the previous 24 hours.
At 00:00 UTC on Thursday (8:00 p.m. Wednesday ET), bitcoin was changing hands around $9,890 on exchanges like Coinbase. By 06:00 (2 a.m. ET), its price began to decline, dipping to as low as $9,049. The price is now well below the 50-day and 10-day moving averages, a bearish technical indicator.
Read More: Bitcoin Stuck Below $10K as Stocks Drop
Traders are being confronted with a sea of red across almost all assets Thursday. Fed Chair Jerome Powell’s speech on the economy didn’t inspire any optimism about the next few quarters. “The virus and the forceful measures taken to control its spread have induced a sharp decline in economic activity and a surge in job losses,” Powell said in remarks Wednesday.
“You can't print your way out of this,” said Zachary Reece, managing partner of digital asset firm Lotus Investment Strategies Global. “I fear we are taking the opposite approach and will see the downfall of the United States dollar.”
Indeed, the U.S. Dollar Index rose 0.4% off its three-month lows Thursday after Powell’s comments. That could signal investors are starting to look at classic safe havens like gold.
“I think the general negative sentiment of traditional markets affects bitcoin,’ said Sasha Goldberg, a senior trader for Efficient Frontier Markets, a digital asset quant fund. “We’re now seeing the following events priced in the market - riots in the U.S., the China-U.S. trade war, coronavirus uncertainty - among other events that happened lately.”
Bitcoin has increased its correlation to gold in 2020, particularly after March’s crash. The 90-day coefficient is close to 0.35, up from 0 back in January. A coefficient of 1.0 means two assets move in perfect tandem while a coefficient of -1.0 means they move in opposite directions. A coefficient of 0.0 implies that returns on the two assets have no relationship.
Gold is one asset trading flat, down by less than a percent at around $1,727 for the day. “In my view gold is the safe haven for old-school investors and bitcoin for more modern-thinking ones,” said Henrik Kugelberg, a Sweden-based over-the-counter cryptocurrency trader.
Cryptocurrency stakeholders have long insisted bitcoin is its own asset class, not tied to any other. However, it seems like it is increasingly operating with the traditional markets, at least for now.
Bitcoin isn’t the only cryptocurrency taking a hit. Digital assets on CoinDesk’s big board are red Thursday. Ether (ETH), the second-largest cryptocurrency by market capitalization, is trading around $230 and slipped 7% in 24 hours as of 20:00 UTC (4:00 p.m. ET).
Weekly Ethereum-based decentralized exchange (DEX) volume is picking up, slowly recovering from March’s coronavirus-induced crash when traders pushed volumes over $400 million for a short time.
Oil isdown quite a bit, slipping 7% with a barrel of crude priced at $36 at press time.
In the U.S. the S&P 500 index fell 5.8%, with major selling in the final hour of trading as coronavirus-induced economic numbers put a damper on the market. U.S. Treasury bonds were mixed Thursday. Yields, which move in the opposite direction as price, were up most on the two-year bond, in the green 18%.
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