‘Black monday’ leaves markets ravaged by major sell-off

Global equity, currency and cryptocurrency markets all suffered a woeful weekend of price action with crude oil slumping by more than 22% while Bitcoin dropped from $9,100 to $7,900.

Analysts have now dubbed today as “black monday” with markets stumbling dangerously into recession territory.

Coronavirus

The sell-off has been attributed to the ongoing coronavirus epidemic, which has caused Italy to quarantine 16 million people in the Lombardy region to stem the flow of the virus.

Cases tripled in Italy between Wednesday and Sunday with more than 7,375 reported cases alongside 366 tragic deaths.

The bold move from the Italian government has been made to preserve the long-term standing of the already fragile economy by preventing a nationwide outbreak, although it means that tourist hotspots Milan and Venice will be inaccessible until April 3.

Oil

The fear and panic that comes alongside an uncertain geo-political climate is undoubtedly the cause of the plunge in global markets, with the London and Frankfurt stock exchanges opening 8% lower on Monday morning.

Oil has been one of the hardest hit commodities with the market opening at a 22% decline from Friday, although this has been caused by an oil price war between Russia and Saudi Arabia.

Low oil prices will come as a boost to consumers who benefit from cheaper petrol prices, but it could also deeply impact a number of the world’s largest economies that rely on profits from the oil industry.

Bitcoin

Despite the fact that Bitcoin is often heralded as a “safe haven” to traditional financial markets, it failed to prevent an onslaught of selling pressure as it printed its worst daily candle since September.

At the time of writing, Bitcoin is trading at around $7,900 having bounced from the diagonal trendline dating back to the start of 2019.

It now needs to avoid breaking below that level in order to remain a bullish posture leading up to May’s block reward halving event.

Block rewards for miners will be slashed from 12.5BTC per block to 6.25BTC per block, an event that has historically seen the price of Bitcoin rise as supply dries up.

However, the bullish theory would be invalidated if Bitcoin was to break below key levels of support before May, notably the diagonal trendline at $7,630 and the horizontal level at $6,600.

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Disclaimer: This article is not intended as financial advice.