The coronavirus pandemic has left a glut of crude oil as restaurants, retailers, manufacturers and airlines struggle through the economic downturn. The unprecedented drop in demand has pushed US oil futures prices to historically low levels, with one barrel clocking in below $0 on Monday,
US West Texas Intermediate (WTI) crude futures skidded into negative territory for the first time ever with producers looking for buyers. But with US storage tanks at peak capacity and the economy at a standstill with bankruptcies looming, the government is running out of ways to boost the price of oil.
Max Keiser, Bitcoin bull and host of the Keiser Report, is calling the slide a paradigm shift.
“I think the world is experiencing a paradigm shift away from oil so the historic highs we’ve seen in price might never come back.”
Says Tyler Winklevoss, founder of crypto exchange Gemini,
“After today, oil can no longer be considered a reliable store of value. Your next best options are the U.S. dollar (gulp), gold (scarce), or Bitcoin (fixed).”
Some analysts speculate that the collapse into negative territory is temporary as the price of the upcoming oil futures contract is set to expire on Tuesday, with upcoming futures contracts trading above $20 per barrel.
According to Alasdair Macleod, head of research for GoldMoney,
“[The] real price is what’s at the supply end of the pipeline, not the temporary depressed cash price at the delivery end. However, storage problems can be expected to hit the 6-month price in due course.”
Crypto analyst Peter Brandt, who has argued that Bitcoin remains in a historic bull trend, is watching for the fallout from the oil market.
“How much blood will be on the street b/c of Crude Oil?
Bankrupt trading firms
NYMEX — margin calls not met
Futures Commission Merchants
This is going to be ugly. Books will be written about today.”
Given the macro economic outlook, Brandt says he’s onboard with Bitcoin as a store of value but questions whether the digital asset can fulfill its promise.
“I understand the bullish narrative for $BTC relative to the: Fables of the Feds and their Frivolous Fiats The argument for the moon makes sense. My only question is whether Bitcoin is actually living up to its high expectations. This question does NOT make me a hater.”
While oil prices can bounce back above $20 per barrel once the May contract expires, the government is unable to print storage space for oil or induce buyers who are out of business. These limitations will continue to carve out a new normal, redefining value and the instruments that can store it.
Crypto analyst Mati Greenspan, founder of Quantum Economics, writes in his newsletter,
“By now, the current oil contract has actually dipped below $1 per barrel. It’s been quite amazing writing today and watching the price drop. People who write in the crypto market are already quite used to this phenomenon where you write something about the price, but then the volatility renders your theories useless by the time it reaches the public.
Strangely enough, the price of bitcoin today remains barely changed and is now holding just fine at $7,000 per coin. I’ve had a bit of fun on Twitter today trying to calculate the oil/btc ratio, but now that oil is trading for one cent, it seems kind of pointless.”
Bitcoin is down 4.77% at $6,864 at time of publishing.
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