By most accounts, the cryptocurrency markets have responded reasonably well to the disastrous economic effects of the COVID-19 pandemic. Bitcoin valuations have been influenced by recent news stories that center around the historic “halving” of these assets and this event has market analysts expecting price moves that extend much higher in the months ahead. Relative valuations in the BTC/USD crypto pair have already shown a high level of stability, even when compared to the performances of traditional market stalwarts like the S&P 500. Overall, this suggests cryptocurrency markets might be showing signs of immunity when we consider how the global economic effects of COVID-19 have impacted relative market valuations in BTC/USD.

Source: Author via TradingView

Market valuations in the BTC/USD currency pair are quickly approaching the prior breakdown highs that rest above 10,500 and a clear break of this resistance zone would suggest crypto markets are ready to test supply levels resting just below the 14,000 level. In the chart above, we can see a large portion of the rally that followed the market’s initial surge in downside price volatility. Of course, this was a market move that hurt most asset classes because investors quickly moved out of stocks and other assets (such as gold and silver) to favor cash positions instead. 

From a technical perspective, the initial upside breakout was signaled by a move in prices above the Ichimoku Cloud (or Kumo) structure during the final week of April 2020. This technical event preceded the decisive break of resistance that occurred near the 7,000 handle and eventually initiated the price rally that sent BTC/USD back into the five-digit territory. During the month of May, however, the BTC/USD crypto pair has traded sideways and this has allowed readings in the stochastics indicator to move back below the 50 level that differentiates between bullish and bearish positioning. 

Source: Author via TradingView

On the daily charts, support and resistance analysis shows that BTC/USD valuations are quickly approaching important supply levels. For traders with a bearish outlook on the pair, this is a resistance zone that can be used when establishing short positions. However, a break through this price zone would be a highly bullish event, so near-term parameters could be useful in defining stop loss levels for individual trades. 

Source: Author via TradingView

Most of this activity presents a stark contrast to the slowing price trends that have been visible in the S&P 500 itself. While the S&P 500 does continue to move higher, we are now seeing major declines in the level of bullish momentum relative to what was previously visible in the index. Of course, the S&P 500 has recently broken above the key psychological level of 3,000 and this is clearly a bullish event for long investors.

However, stock markets remain far below their prior breakdown highs and this should give investors a reason to pause and decide on which market is truly capable of delivering safe haven protection during times of unprecedented economic uncertainties. Resistance in the S&P 500 now rests at 3393.50 but the recent changes in price momentum suggest that it is unlikely we will see the beginning of a long-term bull recovery in the index before the end of 2020. As the potential for emerging weaknesses rises with the reopening of global economies, investors may need to identify alternative asset classes that are shielded from disruptions in stock markets and commodities markets.