A new oil price war between Russia and Saudi Arabia combined with global concerns around the coronavirus led the U.S. stock market to an ugly open on March 9th, with plunging stock prices stirring a sell-off in cryptoeconomy, too, as many investors acutely retreated to safer assets.
On Monday morning, both the S&P 500 and the Dow Jones Industrial Average, two major stock market indexes, respectively dropped by over 7 percent. At one point, the early trading even triggered a 15-minute mandatory trading halt at the New York Stock Exchange.
“The market circuit breakers … give investors the ability to understand what’s happening in the market, consume the information and make decisions based on market conditions,” NYSE president Stacey Cunningham told CNBC.
That safeguard may have given traders a few moments to breathe, but after trading resumed most stocks, indexes, and commodities remained deeply in the red on the day, a reality that has some analysts thinking a bear market may be nearing. Notably, the Monday dive was the worst stocks have been hit since 2008, when the last global financial crisis occurred.
Crypto Sell-Off Ensues
Like stocks, non-stablecoin cryptocurrencies currently trade as “risk-on” assets. They perform best amid positive, bullish conditions as opposed to “risk-off” assets like the Swiss franc and Japenese yen that show strength during bear markets.
With that said, the cryptoeconomy was far from immune to the de-risking frenzy that gripped mainstream markets on March 9th.
After trading as high as $8,900 USD a day prior, bitcoin sunk through $8,000 and traded below $7,700 before temporarily finding support around $7,750. The decline continues the bearish trading seen around bitcoin this weekend, when oil and stock market futures were already projecting major Monday losses.
Other top cryptocurrencies were hit just as hard on the day, as Ethereum’s ETH sunk to $195 (-8.9%), XRP to $0.20 (-4.8%), Bitcoin Cash to $261 (-8.5%), Litecoin to $48 (-10.4%), EOS to $2.98 (-6.9%), BNB to $16 (-11.2%), Tezos to $2.38 (-16%), and Chainlink to $3.95 (-11.27%).
Understanding the Fear
Upon the oil price war breaking out between Russia and Saudi Arabia, the price of oil tanked more than 20 percent on March 9th, making for the commodity’s worst day in the markets since 1991.
The economic dueling comes after the two powers failed to come to an agreement last week with regard to cutting oil production. Now, both sides have committed to flooding the market with as much oil as possible, leading to the price of oil sinking to as low as $31 on Monday. Some analysts at Goldman Sachs think $20 per barrel could be coming soon, too.
These shocks to the oil industry have spooked investors and will have ripple effects on other sectors. They also come at a time when the coronavirus has considerably slowed demand for traveling, and thus oil. Investors are also fearful over the possibility that the coronavirus crisis will lead to a prolonged slowdown of the global economy.
Another Crypto Bear Market?
Ryan Selkis is the CEO and co-founder of cryptocurrency analytics site Messari and has doubled down on tracking the coronavirus story in recent weeks.
In a March 9th post titled “RIP Moon Times,” Selkis posited that the coronovirus could go on to kill millions and start the next major economic recession as more quarantines and business cancellations set in.
If that projection pans out, Selkis argued the cryptoeconomy would understandably experience an acute shellacking in kind:
“Outside of BTC and ETH, I’d expect a late 2018 caliber bloodbath. Nothing else is critical to own or hold right now outside of these two assets, and in a market that may go down 20, 30, 40%, with an unknowable negative human toll (both health and economic wellbeing), the parlor games of the shitcoin casino are over.”
It’s a worse-case scenario worth keeping in mind, in the very least.