Both oil and Bitcoin prices have taken a massive hit over the past week, as coronavirus fears have pulled the plug on economic growth. Oil prices dropped a staggering 5% to close the week at a 14-month low, and Bitcoin declined nearly 20% in the same term.
Some analysts, however, believe that the market for both these commodities will return rapidly, as fears subside. The bounce in value could produce a rapid increase in values, as investors buy in at ‘cheap’ prices.
Oil Supply and Bitcoin Demand
The supply and demand curve for oil has been largely responsible for the depressed values. As international travel has collapsed, demand for crude has fallen in like measure. Because of the massively reduced travel needs, the international sales market has reduced as well.
Further, imposed quarantines in China and other nations have led to a greatly reduced demand for gasoline. Such restrictions, taken together with the reduced demand in airline travel, have left supply grossly high, driving prices rapidly down.
Bitcoin has also seen substantial price reductions, largely due to the coronavirus issues as well. As markets have declined, Bitcoin’s safe-haven asset status has been called into question.
In response, investors have shifted a substantial amount of funds into bonds, further driving down yields. With the shift out of Bitcoin, prices have rapidly declined as well.
Waiting for a Bounce
However, according to analysis from oil experts, the price of these commodities could rapidly increase as fears subside. The current pricing, based on the potential for increased demand, could be vastly oversold, making the commodities ‘cheap’ by comparison.
Such an increase is precisely what Sukrit Vijayakar, director of energy consultancy Trifecta sees as well. Vijayakar told CNBC: ‘I’m optimistic we should see some positive news by mid next week at the latest. Subsequently, the sudden drop in demand will rise back just as suddenly, to at least 75% to 90% of prior levels.
Should the market move quickly to the positive, the result could be a massive increase. It could coincide with a substantial short squeeze as well.
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