The US economy shrunk by 32.9% in the second quarter of 2020.
This is the deepest decline since the US government started keeping records in 1947.
Bitcoin’s fate tied to that of the stock markets, and the news of a contracting US economy might pause BTC’s rally.
During the second quarter of 2020, the US economy has shrunk by a staggering 32.9%. According to reports, this is the largest contraction of the US economy since the government started keeping records in 1947. The current decline eclipses the previous record of 10% set in 1958. The contraction of the US economy has been linked to job losses due to the COVID19 pandemic as well as reduced spending as Americans tighten their belts ahead of what many believe is a recession.
It’s a Tense Moment for Bitcoin as News Hits of a Contracting US Economy
Due to the news of the US economy shrinking by 32.9%, the S&P 500 has experienced a 2% drop from $3,264 levels to $3,200. Further checking Bitcoin, the price of BTC is still hovering around the $11,000 area after experiencing a momentary wick down to $10,800 levels – Binance rate.
Judging by the fact that Bitcoin has proven to be highly correlated to the traditional markets, it will be a tense few hours or days as both markets digest the news of a shrinking US economy.
Bitcoin Could Possibly Drop Below $10,000
To note is that there is a sense of optimism surrounding Bitcoin after the King of Crypto rallied hard from $9,100 to $11,400 in approximately one week. However, many crypto traders are very much aware of the existence of a CME gap found between $9,600 and $10,000 that occurred between Friday the 24th of July and Monday the 27th.
Summing it up, the US economy has shrunk by 32.9% during the second quarter of 2020. The contraction was brought about by job losses and reduced consumer spending due to the economic effects of COVID19 and the pandemic’s associated lockdowns. As a result of the news, Bitcoin is facing a tense moment as traders in both traditional and crypto markets, digest the new information regarding the direction of the US economy.
Furthermore, there is a Bitcoin CME gap at $9,600 and the news of a shrinking US economy could be the catalyst required to fill that gap. Both CME Bitcoin futures and options also expire tomorrow, July 31st, setting the stage for a tense 48 hours.
As with all analyses of Bitcoin, traders and investors are advised to use adequate stop losses as well as low leverage during uncertain times.