Bitcoin was falling sharply during the early New York trading session as investors pinned hopes for a compelling novel coronavirus vaccine.
Russia, on Tuesday, announced that it had authorized its COVID-19 treatment beyond clinical trials. President Vladimir Putin’s daughter was among the first to receive a shot after the vaccine’s approval for public use.
However, global health experts showed their skepticism over the speed at which Moscow’s Gamaleya Institute for Epidemiology and Microbiology developed the vaccine. Investors, on the other hand, offset those concerns and decided to move out of risk-off assets, hurting both gold and Bitcoin.
Bitcoin Faces Downside Risks
The BTC/USD exchange rate plunged by 2.5 percent to $11,604 on Tuesday, logging its worst decline in the last ten days. The fall came as a part of a technical correction that followed the pair’s close above $12,000 on Monday. The vaccine news merely strengthened the downside bias.
A typical look at the Bitcoin chart showed today’s plunge as a healthy correction. The cryptocurrency was still trading more than 200 percent higher from its mid-March lows near $3,858.
Nevertheless, it risks facing more selling pressure if the early results of the Russian coronavirus vaccine–dubbed as Sputnik V– are positive.
The whole reason behind the global market’s collapse in March was the COVID-19 pandemic. With expectations of limiting the epidemic, investors might move outside safe-haven markets to seek profits in bonds and equities, hurting both gold and Bitcoin.
The precious metal also fell below $2,000 on the vaccine news.
What benefited the most on Tuesday was the travel company shares. They were the most affected stocks as coronavirus caused a collapse in the demand for tourism. British Airways parent International Airlines Group climbed 8 percent, while InterContinental Hotels rose by 4 percent.
Shares in the US, European Union, and Asia also grew higher on Russia’s vaccine news.
Fundamentally, Bitcoin could offset downside pressure with the news of the second stimulus package in the US. Reports indicate that President Donald Trump and the US Congress might finalize the aid this week.
That would mean more cash liquidity into the market, and a further ballooning M2 money supply.
Investors have already expressed their fears of inflation by sending US real yields below minus 1 percent last week. That might help both Bitcoin and gold limit their short-term downside bias.
Technically, a further correction would BTC/USD towards $10,500, a level it last tested as support on August 2. The market should expect the pair to bounce back from there. But an extended correction would mean a clear fall towards or below the $10,000-support.