KEY POINTS

  • Celebrated trader and analyst Tone Vays thinks that if Bitcoin falls to $2,800 before the halving is acceptable
  • The uncertainty brought about by the coronavirus could dampen the markets further and BTC and other cryptos' losses might be more magnified
  • If Bitcoin doesn't rally after the halving and stays at its depressed levels, there's a risk that plenty of miners would render their business unsustainable

Bitcoin (BTC) is currently confined within $5,000 prices after suffering alongside stocks and oil in last week's trading. Its attempt to breach $6,000 on Sunday was unsuccessful and even dipped to a weekly low of $4,400 twenty-four hours later. 

The past three days have somewhat been positive, albeit posting moderate gains, but the market's reaction toward the coronavirus hasn't reached its full tilt. Bitcoin's price has been the extreme case of a risky asset's volatility, especially when juxtaposed to stocks' declines the week before, and it could remain that way until there's a clear indication that the virus is being contained.

BTC's selloff led Euro Pacific Capital CEO and chief global strategist Peter Schiff to draw a positive correlation between BTC and equities and a negative correlation to a safe haven asset like gold. The benchmark crypto was 65.6% correlated to the S&P 500 on a 7-day comparison, according to Traders Magazine.

So, as companies and the entire global economy wail, with Pershing Square Capital Management CEO and founder Bill Ackman saying on Wednesday that "hell is coming" and begged President Trump to close down the country for at least thirty days, there is a great deal of uncertainty in the coming weeks for the markets.

Any pessimism and quick desire for liquidity could once again trickle down to crypto as it had done so since mid-February. If stocks continue to fall, there is a real possibility that BTC and the rest of cryptos could follow suit. But if there is another selloff in cryptos and its flagship asset gets pushed to $2,800, one analyst says it's not all that bad.

Tone Vays had anticipated since November last year of a BTC fallback at exactly along this current timeline. And, why Vays is particularly confident that everything will be alright for Bitcoin is that it's happening before the "halving." The top crypto is set to reduce the rewards it gives to miners by half in May. And, historically, BTC's price has always traded lower, leading up to the supply limiting protocol that happens once every four years.

"In fact, I always anticipated it before the halving — so it's getting there, even if it's a few weeks before the halving, I am perfectly fine with it," said Vays.

Vays also said that he sees the bottom at $2,000.

While at that price might seem like a bargain to board the BTC bandwagon, it's those who maintain the transactions of the king of cryptos that are getting hammered even with its present price. Small scale miners have terminated operations since the depressed levels disincentivize them from selling their Bitcoins.

"Due to the declining BTC price, it is now unprofitable for many miners to continue their operations. Since its peak on March 7th, the 7DMA of Bitcoin's hashrate has fallen by ~16% – with hashing power disappearing even faster after the drop to $5k," on-chain analytics platform glassnode tweeted.

If Bitcoin does fall further to a price below $5,000 and struggles to gain substantial interest from speculators to prop up the price, especially with the halving coming up, it would not be very easy for miners to sustain operations.

And, what's worse is that it ends up not appreciating in value at all even after the reduction of block rewards since the world is so preoccupied with COVID-19. This could mean the idea that the coronavirus is the black swan event that would wipe out the crypto would be true in this sense.

bitcoin For the cryptocurrency market, there are a number of ways to short crypto assets. Photo: Pixabay