Bitcoin plummeted sharply in the early US trading session Monday shortly after Pfizer and BioNTech revealed a breakthrough in the quest to find a COVID-19 vaccine.
The pharmaceutical companies announced that they had developed a more than 90 percent effective drug in late-stage trials. According to their official statements, the vaccine prevents the novel coronavirus in patients with no prior history of the infection.
“Pfizer expects to produce >50M vaccine doses in 2020 and up to 1.3B doses in 2021,” the press release revealed, raising expectations that the first batch of COVID-19 doses might enter the market by the end of this year.
Hedging assets Bitcoin and gold reacted negatively to the vaccine news.
The benchmark cryptocurrency fell by up to $1,039, or by 6.56 percent, to $15,817, while the precious metal’s spot rate plunged 5.02 percent to $1,853 an ounce. Meanwhile, the US stock market soared higher, with the pandemic losers – such as airlines, hotels, and airplane makers – leading the gains. Oil surged, as well.
The sell-off shock in the Bitcoin market also appeared on technical signals. Last week, the cryptocurrency rallied to log a new yearly high near $16,000 for the first time since January 2018. Meanwhile, its upside move landed its oscillator into an overbought area (notice the RSI in the chart above).
The price corrected to neutralize its sentiment, jumped back again to retest $16,000, only to plunge later due to the vaccine news. That resulted a bearish reversal signal. Dubbed as ‘Double Top’ formation, the technical indicator now eyes a plunge towards $14,325, followed by a breakdown move towards $12,700 (according to its technical description).
Bitcoin Long-term Bullish
Many analysts agree that Bitcoin could still retain its bullish bias because of an impending stimulus bill from the US government. Meanwhile, the Federal Reserve continues to purchase government debts and keep interest rate near-zero.
That has forced bond yields into negative territory, with a Bloomberg report indicating the amount put in below-zero sovereign yields reaching a record $17.03 trillion. That has pushed investors seeking profits elsewhere, benefiting Bitcoin, as well as stock and gold.
“This volatility is just fast money funds that play BTC as a higher beta,” said Cantering Clark, an independent market analyst. “GOLD dumping on vaccine news. The players that enter on behalf of the longer-term thesis for Bitcoin are not changing their positioning.”