The oil market started the week in a free fall as it crashed more than 30% in a single day. This is believed to be the worst single-day crash since the 30’s. The price of Bitcoin (BTC) was slow to react to that but it eventually did and now we have seen the price decline below $8k and it is struggling to garner the momentum to rally now that it has declined to a key support. As for WTI Crude Oil (USOIL), this may just be the beginning of a major downtrend that could last through all of 2020 and potentially longer. The situation was further worsened by the Coronavirus outbreak slashing demand in addition to disagreements over production rate cuts.

As things stand, Russia and Saudi Arabia remain divided on any production cut policies and they have started a full-scale war to undercut each other in the oil market. This led to traders panicking and that is why we saw the major crash. Oil analysts believe that this is just the beginning of a major downtrend. It is rare for a major production surge to coincide with a drastic decline in demand. Now that it has happened, we could be looking at a 2014 styled downtrend in the oil market. This would definitely hurt the cryptocurrency market once again, most likely in similar ways as it did in 2014. This is why I have been saying for the last two years that we are going to see a 2014 styled crash in the cryptocurrency market and not a 2018 styled crash.

All of it seems to be in motion now. For now, the 4H chart for BTC/USD shows that the price has found support on the 61.8% but it looks very vulnerable. Until and unless we have a close above the 61.8% on the daily time frame with some sort of consolidation, it is premature to flip bullish on the market or expect a rally towards $9k from here. The price could still decline further within the wedge before beginning a new uptrend.

The cryptocurrency market has seen a major shift in sentiment in the past 48 hours. A lot of traders are now very scared and quite pessimistic. It would therefore not be unreasonable to think that the market could rally short-term but the long-term outlook remains bearish. Until and unless we see a break out of the descending wedge, the probability of BTC/USD declining further remains quite high. The situation with oil as well as the coronavirus outbreak is still too volatile and we could see wild swings in the market. It is therefore important not to rush into trades just yet and wait for confirmation of a trend reversal.