What are the crises in the oil market?
Everyone is aware of the present scenario rattling down the oil prices. The reason behind this crisis is the oil war against Saudi Arabia and Russia to win over the oil market. The production of oil has increased over days to win the war but this war took place at the wrong time of the global pandemic. Most countries are not importing oil due to lockdowns. As the production has increased and the demand has decreased the prices fell down by a huge scale. The WTI crude futures collapsed over 300% in a single day.
The US faced a negative of $37 per barrel price in a single day. The oil prices are falling at a greater pace and have been a catalyst for the downfall of the country’s economy. Can this also lead to the downturn of the crypto market? Can the oil prices affect the cryptocurrency’s value? Let us have a look at it
Oil downturn hovering the crypto market
The major downturn in oil prices has affected the country’s economy to a great extent. The market has been falling and facing crises as the value of assets are decreasing. This has had an impact on the crypto market as well. The value of Bitcoin has reached down to $6915 from its high of $7100. Where the currency was expecting to get the support of $7500 and reach the $8000 mark this has been an unexpected turn. Still, the BTC is being considered as a bubble to stay strong at $6000. The Bitcoin is still at high and values up to 600 barrels of oil. Yes, you heard me right you can buy 600 barrels of oil with one Bitcoin.
Oil market and its contribution to the economy
The US has been caught up in the war between Saudi Arabia and Russia to gain control over the oil market. The US is one of the largest importers of oil as the cost of production by the US climbs up to $40 per barrel whereas the same job can be done by Saudi Arabia for just $10. The US reserves are getting full and the US is running out of oil storage. The demand and production equation is all messed up.
Oil is a commodity and an asset, the government cannot control it and cannot keep it stable as the stock market. But as in geopolitics Bitcoin develops its nature according to the market. It shows its dependency over the market to determine its price. We know that there are big players in both markets who can turn the tables around and influence the price-performance despite the expectations of common traders.
If the oil war doesn’t end soon, it will create an unbalanced market, and Bitcoin will be tested as a hedge by the conventional and nonconventional investors. Some crypto analysts are pointing towards oil collapse and suggesting that Bitcoin will be a stronger asset than the actual commodity
This does not point towards investors turning their heads toward the crypto market or Bitcoin reacting towards the crash. It just states out the possibility that the oil crash can hamper Bitcoin. No one knows how much will be the impact but all we know is that Bitcoin will be a greater asset than oil or any other commodity in the future.