The price of Bitcoin fell as did the Dow Jones index, but these three key reasons could prevent a prolonged decline.
The U.S. stock market plummeted when the Dow Jones Industrial Average (DJIA) fell 358 points in pre-market trading. The price of Bitcoin Freedom fell to $10,374 on the major exchanges, but a further decline is unlikely.
The one-hour Bitcoin price chart
Three key reasons could drive short-term Bitcoin sentiment. The potential catalysts are the likelihood of a stimulus package, the strong technical reaction of BTC and the resilient support level of $10,500.
A stimulus package is increasingly likely as a result
Over the past month, the Dow Jones has struggled to recover amid the resurgence of COVID-19 cases.
Several macro and political factors, including U.S.-China relations and stagnant stimulus, added significant pressure on the index.
Bitcoin Price Falls Along with Major Stock Exchanges After News of Donald Trump’s Coronavirus Positive
From the peak of September 2nd, the Dow fell by 4.4%, according to Google Finance. Technology indices, such as the S&P 500 and the Nasdaq Composite, recorded higher losses of around 5.6%.
Unexpectedly positive COVID-19 testing by U.S. President Donald Trump further shook the markets. The price of Bitcoin fell along with the Dow in the last 12 hours after President Trump tweeted:
Although the news initially caused the markets to fall, it may cause the Republicans to reconsider the stimulus proposal.
On October 1, House Democrats officially passed a $2.2 trillion stimulus bill, which includes direct stimulus controls. The Trump administration and the Republicans rejected it, saying there are many unnecessary elements in the deal.
But as the presidential election approaches and markets collapse, it could make the Trump administration work toward stimulus. When a stimulus passes, Bitcoin and the Dow are likely to skyrocket, which could boost BTC’s momentum.
Bitcoin undergoes a strong technical correction
Bitcoin fell around $10,380 on Coinbase when the Dow sank over 300 points in the pre-market trading session,
Since then, Bitcoin experienced a relatively strong recovery. BTC saw highlights below $10,400 in the lower time frame charts, but quickly recovered above it. BTC is now consolidating below $10,500, which has acted as a critical support level since early August.
Inflation has cost Bitcoin hodlers 20% over the last decade
A trader known as „Benjamin Blunts“ said that BTC is more correlated with stocks than gold. Given the strengthening correlation, if stocks recover after the initial market reaction, it could relieve some of the pressure on Bitcoin. The trader said:
„I think, once and for all, we can all agree that #btc is not correlated with gold and is correlated with stocks, we shouldn’t cut and switch when it suits our bias, that’s how it is now.