With stakeholders looking to stimulate the U.S. economy following panic caused by the current COVID-19 pandemic, the top-ranked cryptocurrency appears to be making another play for a significant recovery after falling to $3,800 earlier in March.
Despite the upward price action, network fundamentals appear to still be struggling as exiting mining nodes see the blockchain hash rate continuing to fall. Such is the extent of the decline that pundits say a 15% difficulty reduction is on the cards even with the block reward halving event less than two months away.
Bitcoin Price Regains $6,000
Over the last few hours, the Bitcoin price has seen a significant upward push beyond the $6,000 price mark, temporarily reaching $6,600. Despite printing a huge green candle, the top-ranked crypto has so far been unable to break past the $6,800 resistance level, retreating to a little above the $6,300 price mark at press time.
However, Monday’s surge in the Bitcoin price represents a significant development given the current events in the U.S. financial sector.
As reported by CNBC, the Fed has announced plans to purchase assets without any upper limit as part of efforts aimed at stimulating stock market recovery for the U.S.
According to the Fed’s statement, the decision to adopt aggressive intervention strategies comes following the strain of the COVID-19 pandemic on the global economy. The reported infinite quantitative easing is on top of a recent $700 billion spend by the Fed on Treasurys and mortgage-backed securities.
Despite the Fed announcing an expanded balance sheet, markets have so far failed to react positively with the Dow falling by a further 260 points. As for the crypto market, Bitcoin’s current gains represent a departure from the continuing decline seen for altcoin token prices.
As at press time, many of the altcoin tokens are still in the red with the Bitcoin price surge not yet stimulating any recovery for the rest of the crypto market.
Cryptocurrencies are still reeling from Black Thursday with both Bitcoin and Ethereum falling by about 50%. However, Bitcoin has seemingly been on a recovery path, gaining more than 80% since the drop to $3,800 as previously reported by Blockonomi.
Correlated on Non-correlated?
The Bitcoin price increase happening at a time when the U.S. stock market is taking a continued downward dip might help to bring back the crypto’s non-correlated status. Over the past 30 days, Bitcoin trading has seen its highest correlation with the stock market, reaching 0.6 last week.
The increase in BTC’s correlation with the S&P 500 since the start of the COVID-19 panic has contributed to denting Bitcoin’s image as a non-correlated asset. However, the change did happen at a time of massive de-risking with investors seemingly looking to liquidate their assets for cash.
While Bitcoin price may be recovering, the network’s fundamentals are still taking a hit with the hash rate continuing its decline.
Since the start of March, the Bitcoin hash rate — the computing power dedicated to securing the network, has dropped by more than 24% as mining nodes exit the blockchain in droves.
With the significant reduction in the hash rate, the Bitcoin network is expected to undergo a downward difficulty adjustment of up to 15%. Meanwhile, the halving that will see a 50% reduction in block reward comes up in less than two months.