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Why Energy Experts are Watching the Crypto Market Closely

The oil market is currently witnessing a tussle between Russia and Saudi Arabia on the issue of oil production to counter the slowdown of the US Market.

If the rumors are to be believed, the Iranian Government is making efforts to use cryptocurrency to bypass the sanctions which resulted from their involvement in the manipulation of the oil market. If one takes a closer look, China, Russia, and Iran have been some of the most active countries taking a keen interest in the cryptocurrency space. They are also some of the top oil-producing countries in the world.

Many cryptocurrencies, particularly Bitcoin operates on ‘Proof-of-Work’ algorithms which require energy for mining.

“Big crypto mining pools are rejecting Iranian miners because of sanctions We don’t give a damn about sanctions. If we get sanctioned we’d just shut down the company and open a new one.” as stated by Mikhael Jerlis, CEO of the Russian EMCD.IO mining pool

The three years of the proxy war between Saudi Arabia and Iran in Yemen has left the oil market in chaos. The catalyst appears to be the attacks executed by Houthi rebels at Red Sea’s Bab al-Mandeb Strait resulting in Saudi Arabia halting its oil supplies. This is why the crypto savy alliance of Russia, China and Iran are keeping a close watch on US sanctions and Saudi Arabia’s oil movement.

How Cryptocurrency Kicks In?

It is interesting to address that Bitcoin or for that matter, any other cryptocurrency can replace the ‘dollar’ in the oil market since Bitcoin is the least correlated asset in the glocal economy as compared to the oil market. Despite the havoc ‘Coronavirus’ is creating on the global GDP (reportedly $2.7 Trillion Loss), Bitcoin doesn’t seem to be shaken off from its steady route, having gained twice the market price of $7,900 as compared to last year’s market price.

“You could argue they [gold and the dollar] are inversely correlated. That could be an indication of how bitcoin will be impacted if it’s deemed to be a store-of-value asset class.” Aboualfa said.

However, he also mentioned that Bitcoin/cryptocurrency is looked upon as ‘sanction play’ and not any store-of-value asset class.

Apart from bypassing sanctions via playing with Bitcoins, another factor that makes the energy experts keep a close watch on the crypto market is their deep pockets in the crypto markets. Bitcoin, like any other asset, is currently without a doubt a ‘hot stock’ which is wanted by everyone. Whether or not it is going to make a big mark in the future, its potential to earn you big money in the current case scenario is very real.

On 7th March 2020, Bitcoin took a big hit as its price crumbled to $7,500 from a soaring $9,100. A total of $26 Billion was completely wiped off from the cryptocurrency market. Such a reaction came soon after the oil market plunged 24%, the worst day since 1991. The US West Texas Intermediate Crude posted their report on Monday with a drop as low as 24.59% settling for $31.13/Barrel. The drop in terms of absolute dollars was $10.15.

Apart from the drop on 7th March, Bitcoin again faced a nose crushing fall on 12th March where the price fell below $3,000 bouncing back to struggling $5,500. The reason for such a fall was again attributed to the poor stock market condition in US and fall in Oil Price, not to forget the COVID-19 outbreak.

Source: CoinMarketCap

Such kind of dips in the crypto markets (triggered by oil market) are huge opportunities for the big corporate giants and energy experts with a vested interest to buy crypto assets at low prices and make a profit out of it once the market is on the rise again.

Jehan Chu, co-founder of Kenetic Capital said,”For those who have long term investment horizons, bitcoin is absolutely a buy during these dips. We can expect more of this volatility sparked by macro health and financial shocks, but ultimately long term investments in the digital future and it’s key asset Bitcoin will be a winning strategy”

In order to maximize profits and take the full advantage (even when oil market is down), energy experts are keeping a close watch on the crypto market as part of their asset portfolio diversification.

Image via Shutterstock

Is Bitcoin’s True Power Being Revealed as COVID-19 Market Crisis Sends Oil Futures Price Below Zero?

As WTI crude oil futures plummeted into negative territory, Bitcoin hardly seemed to notice, recording only a minor correction and dipping under 7k.

Is Bitcoin starting to reveal its true potential as a safe haven asset? While the pioneer crypto lost relatively little value could it be too early to tell and is the Bitcoin price soon to be in danger? It may also be possible that fewer BTC holders are willing to part with the potential safe haven value store given the current COVID economic downturn. If the shock crude oil crash does not demonstrate a potential weakness in the structure of our global economy and a need for an asset with the promise of Bitcoin, then frankly nothing will.

The sell-off appeared to be mainly attributed to the impending expiration of the the May 2020 Futures contract for West Texas Intermediate (WTI). The expiration of these May contracts force the handover of physical barrels of oil at a time when storage capacity is critically low. According to data from Bloomberg, on April 20, futures for a barrel of WTI crude oil expiring in May lost 36% on Monday.

Source : WTI May futures – Trading View

The sell off continued and at its worst the crude oil price stopped just shy of negative $40 dollars with the contracts finally settling on -$37.63%, a whopping -305% decline which is unheard of in the history of WTI crude oil futures.

The shock crash is indicative of just how much oil demand has collapsed due to the COVID-19 pandemic lockdown which has not been further helped by the ongoing oil price war between Russia, Saudi Arabia and Mexico. As there seems to be no end immediately in sight to the pandemic, the financial community is growing concerned that we may see a repeat of this price action with June crude oil futures.

Oil Plummets, Bitcoin Hiccups

As the crude oil futures plummetted, Bitcoin appeared to be almost at business as usual. Bitcoin which had been experiencing a bullish recovery from its initial fall and was sitting at around $7,200 prior to the crash, in the immediate 24 hours after, the price dropped nearly 5% and currently sits at around $6900 – which is a very small movement in the world of Bitcoin.

Source – CoinMarketCap

Are Bitcoiner’s Safe in their Harbour?

Bitcoin was built in reaction to a broken global economic system. It was designed as an alternative to traditional state-controlled financial currencies and markets. That’s why many have thought for the last 10 years that the Bitcoin price would shoot up if the stock market were to crash.

However, almost as soon as the US stock markets started to crash in February, the price of Bitcoin showed very strong market correlation and also declined. The Bitcoin price halved from around $10,000 to $5,000 in a matter of weeks, shedding thousands of dollars in just a few days. This proves that the first move of many investors wasn’t to rush to trade their stocks for Bitcoin. It was to trade their Bitcoin for US dollars and stablecoins.

Oil’s price action is a testament to the instability of the legacy market infrastructure prevalent in the global economy unable to balance the fundamentals of supply and demand. Bitcoin, however, which continues to dance in and around these traditional markets, held in price against the shocking decline of demand for black gold which has breathed new life into its potential safe-haven status.

While BTC’s movement remains on track to make its post halving bull run seemingly undeterred by the oil crash, the truth is it is just far too early to make a call on its ability to act as value store that will survive through the pandemic crisis.

Another potential issue that hardcore Bitcoiner’s do not appear to be recognizing is that bringing new blood to the market will not be as easy as continually pointing out the failures of our system. Essentially, Bitcoin will only be recognised as a safe haven when its market action reflects this through holdings by investors, but why would these investors suddenly turn to a nascent technology that they hardly understand in the middle of COVID chaos, while in reality, traditional safe-haven Gold is now performing as expected?It may be too early to tell if Bitcoin has gotten away clean from this latest incident in the rising global financial crisis brought on by the COVID-19 pandemic, and it’s still far too early to speculate if it will prevail as a safe haven.

April 21: Essential Oil No More

Trading Crypto with Eugene is a series of daily commentary of market analysis and trading advice shared by Eugene Ng of Matrixport, a veteran trader with 10 years of experience in top-tier global investment banks. If you like the article, please follow us here on Blockchain.News so you won’t miss our future publications.

With the exception of USDT, the top 10 market-cap coins are in the red in the past 24 hours with majors mostly down between 4 to 10%. Official confirmation from PBOC that it’ll be testing a mobile app for its digital yuan in four cities with a fifth in the works. Despite the positive news, practically almost everyone was looking at oil last night as crude may oil futures settled at a historic -$37.63.WTI should be renamed as WTF. Many argued that it was due to $USO rebalancing, but this isn’t the case because the ETF was only down 9% as USO would have owned mostly June contracts now. In short, it’s due to retail players not being able to take on physically owned oil (brokers had to liquidate their retail accounts) and to a lesser extent, storages are running tight. On a side note, I actually think it’s a great time to nimble into the oil. Who knows maybe the Fed will start buying oil too?

A $660 billion commodity blew up last night, but BTC only down 4%, another sign that volatility has indeed been declining as the market awaits for halving, increasingly feels more and more binary. Another interesting development is that Tether’s market cap has now grown more than US $7bil with $120mil minted recently.

My bias for higher was driven by technicals yesterday, and today I struggle again to be decisive in where we move. I still think risk assets will give up some of its gains this week; we are only 15% from all-time high in stock markets when the world is in lockdown, global recession, oil market crashed, busted supply chains, 25million unemployed (and more to come), an implosion in global trade, and potential second wave attacks from covid19. The second reason is that Morgan Stanley estimates a selling flow of $30-50 bn of global equities for rebalancing at the end of the month (larger than average) and usually it starts 5-7 days before the month-end.

How do we trade? Keep holding the $7,500 call option as a lottery ticket, while I would advocate on following where risk assets trade. It is also time to start going long volatility (i.e. buy puts or calls) given that implied volatility has basically returned to pre-March crash levels and looking a lot more attractive than before. Good luck.

Cup & Handle Pattern tends to be bullish continuation patterns so technicals supporting the uptrend narrative…

Larger wedge formation shows potential for $7,800 to $8,000 region if we do see the uptrend technical play out…

ETH in a triangle too… There is a chance we go either direction, but just wanted to highlight to you how far it has rallied since Friday.. more than 25%…

DisclaimerOpinions expressed are solely the analyst’s own and do not express the views of Matrixport the company.

The views and opinions expressed in this article are those of the contributor and do not necessarily reflect the view of Blockchain.News.

Iran Pushes Oil Investment on Citizens, Winklevoss Advises Bitcoin

Despite the oil price taking a beating this year, Iran has urged its citizens to invest in a scheme that would pre-sell 220 million barrels and drive liquidity into the OPEC nation’s struggling economy. In response, Cameron Winklevoss tweeted that Bitcoin is a far better investment.

The President of Iran and his administration have been encouraging Iranians to invest in the struggling oil market, prompting the famous Bitcoin billionaire Cameron Winklevoss to start a Twitter debate on black gold’s flaws compared to Bitcoin.

During a televised cabinet meeting, President of Iran Hassan Rouhani said that “The stock market and oil — not gold and the dollar — are the places to be investing and we want to help people this way.”

In a plan that has been ratified by Iran’s Supreme Council of Economic Coordination, the OPEC nation plans to enable members of the public to invest in oil on its capital markets for the first time. The economy of Iran has been battered by the COVID-19 pandemic, continued United States sanctions and declining oil demand.

In April, the oil market fell to new lows when expiring oil futures contracts scheduled for a May delivery through the West Texas Intermediate crashed by more than 100% send the oil price into negative territory.

Despite the obvious poor climate for oil investment, the Iranian government is forging ahead with its strategy to pre-sell 220 million barrels of oil to its citizens.

President Rouhani said, “The government is doing everything to control liquidity and counter oil sanctions […] the plan will help the economy and secure revenues for our people.”

Cameron Winklevoss Says Bitcoin not Oil

With a tweet that seemed in almost direct response to the Iranian government’s plan, Cameron Winklevoss took the opportunity to highlight the flaws in the oil market and suggest that Bitcoin is clearly the best option for investment.

Accompanied by a Wall Street Journal report on the frailty and uncertainty of the oil markets, Winklevoss wrote, “Oil is not a reliable store of value. #Bitcoin.”

While Bitcoin did initially take a hit with the rest of the S&P 500 on Black Thursday in March, the original cryptocurrency has made a strong recovery and there is now consensus amongst many mainstream investors that it has become a new form of digital gold.

Bitcoin’s price now sits at $11,527.99 at the time of writing according to CoinGecko.

Winklevoss appears to believe that if Iranian President Rouhani was serious about creating value for his citizens, then Bitcoin is the clear choice but it obviously would not directly impact the liquidity of the struggling oil-rich Iran economy.