Risk sentiment improves as Traders turn to Cryptocurrency Alternatives

Monday’s European session was marked by a pure “risk off” sentiment as safe haven assets soared and stocks declined. The global stock market was experiencing declines between 1% to 1.5% but experienced a strong surge in buyers as the price reached previous support levels. For the first time this year, the Dow Jones ended the day as the best-performing US Index. The Dow Jones increased by 1.20% after a strong decline earlier in the day. The Dow Jones was positively influenced by a rebound in large banking stocks, such as Goldman Sachs, and defensive stocks. 

Over the past 2-weeks, we have largely concentrated on the Dollar, Equities and Gold which have experienced interesting price movements. However, other commodities have also experienced clear trends, such as Crude Oil. In addition to this, cryptocurrencies have recently been used as an alternative to the Dollar and banks. 

Crude Oil 

The price of Crude oil has declined by more than 15% over the past 2-weeks and, yesterday, reached a new 68-week low. Crude oil experienced a similar price movement to other risk-based assets. The price declined during the first half of the day but saw a full price correction during the US session. Overall, the global market saw increased confidence after midday's latest central bank speeches. 

Crude Oil 2-Hour Chart on March 21st 

Even though the price has significantly declined, the price is being influenced by both positive and negative factors. Consumer demand and the rapid recovery of the Chinese economy, which economists expect to return to positive levels of growth this year, may also influence the asset. In addition to this, the high employment levels in most major economies are having a positive effect. Many large institutions still believe the price of Crude Oil may increase in value later this year. 

According to Goldman Sachs last night, the growth of oil production by OPEC countries is expected only in the third quarter of 2024; the price of Crude oil will increase to $97 per barrel in the fourth quarter of 2023. However, on more than one occasion this year, Goldman Sachs has predicted an increase that has not materialized. Also, a price of $97 per barrel is lower than previous expectations. However, if demand does continue to remain high or even increase, and the Ukraine-Russia conflict continues, the price does have possibilities of strong bullish price movement. 

On the other hand, the low investor sentiment and even recession fears are influencing the instrument’s decline. The recent failure of 3 US and 1 European has brought about the change in sentiment. In addition to this, Russia is flooding the Asian markets at a discount price which is straining prices. 

Tomorrow’s Crude Oil Inventories and the Fed’s rate decision in the evening will influence the price action over the next 2 days. 

Bitcoin 

The price of Bitcoin over the past 24 hours increased to its highest since June 5th 2022, and had formed 5 days of consecutive increases. The price of Bitcoin is slightly lower during this morning’s Asian session but still remains relatively high. The asset forms a symmetrical triangle that traders can use as breakout points for further trade signals. The most recent price movement is currently in favor of the further climb, though traders should be cautious of the recent resistance levels. 

Bitcoin/US Dollar 1-Hour Chart on March 21st 

Markets are known to associate the price of Bitcoin with the market’s risk sentiment and the Central Bank’s monetary policy. However, the price seems less correlated and has significantly increased regardless of the market’s low-risk appetite. This is mainly a result of investors fearing keeping their capital in US Dollars and Banks. The cryptocurrency market has become a quick and easy alternative for retail and more prominent investors. 

In addition, most analysts believe the Central Banks will unwillingly end the tightening of the global monetary policy. This is also considered positive for cryptocurrencies. Though traders should note that if the economy does fall into a recession, the future pricing may be more challenging to determine in the short to medium term. Currently, most economists believe the Fed will opt to increase interest rates by a further 25 basis points. 

Summary:

• Markets recover after a dip in investor’s risk appetite. Traders turn their attention to tomorrow’s rate decision. 
• Crude oil has declined by more than 15% over the past 2-weeks and, yesterday, reached a new 68-week low.
• Traders turn to cryptocurrencies as an alternative as the market fears a liquidity crisis. Bitcoin climbs to a 9-month high. 
• Economists expect the Federal Reverse to hike 25-basis-points at tomorrow’s rate decision.