Since taking office in 2016, President Trump seems to have revived the US stock market after it showed signs of slowing down during the first half of the previous decade. Just three weeks ago, the US market saw a combined increase of 58% over the previous three years. However, following the World Health Organization's recent announcement of the Covid-19 pandemic on March 11 – with an independent research agency citing 145,810 cases and 5,436 deaths worldwide – the This pink painting seems to have been reversed 180 degrees almost overnight.
In addition, since the news of a medical emergency and the prohibition of people from Europe from entering the United States for 30 days was suddenly announced, the entire world market began to collapse with speed. unprecedented levels, with major economies such as Australia and India preparing for a deep recession. Stocks in Vietnam have also lost more than $ 30 billion in just one week, since the news of the number 17 patient was discovered in Hanoi, since then, there have been 30 more infected in all three regions. country.
Not only that, regular office work around the world is also severely disrupted – with many companies choosing to adopt home-working policies, which seriously affect the global supply chain and cause a lot of problems. Public events and large conferences are canceled. Thereby also crippling global internet network due to overload.
The impact of Corona
Amid all of this, Bitcoin was under a lot of downward pressure, with the top crypto asset falling from $ 10,000 on February 24, to $ 3,800 on March 13. Specifically more than that, the value of Bitcoin dropped to more than $ 3,000 after New York Governor Andrew Cuomo issued a public statement making a medical emergency, thereby blocking the area a mile around the outskirts. New Rochelle umbrella of America's largest city.
3-month BTC price chart | Source: Coinmarketcap
Although there is a clear connection between the BTC price decline and the ongoing stock market decline, some experts believe that the BTC price slippage is more relevant to the recent PlusToken landfill and the weakness. Other internal factors instead of market fear caused by corona virus.
In this regard, Bill Herrmann, CEO of investment banking firm Wilshire Phoenix, thinks that the current negative movement of Bitcoin can be attributed to the instability of the traditional market. In this regard, he suggested that:
The period of extreme volatility, often followed by panic – most retail investors, whether it's Bitcoin or stocks, sell first and ask questions later. Cash is King.
A similar opinion was shared by Mati Greenspan, founder of Quantum econom, who said that it was quite unusual that during this period of extreme volatility, Bitcoin seemed to reflect fairly major stock indices. body.
However, David Waslen, CEO of HedgeTrade – a blockchain-based financial trading application – says that while there is certainly a correlation between Bitcoin's performance and the traditional market in general, comparisons quite limited by some appropriate variables. BTC is completely different. Waslen added:
Bitcoin's price has responded to the recent stock market downturn and continues to correlate with negative news. But it also does its own thing, such as an increase on March 6 while the stock is in a difficult situation. It is also affected by things that are completely unrelated to traditional markets, such as mining, whales and trading.
Is Bitcoin really an independent store of value?
With Bitcoin seemingly reacting quite strongly to the price adjustment being witnessed in stocks, crude oil and other commodities, it is worth exploring an answer to the question, is it BTC? Is it really an unrelated property type?
Greenspan believes that the current events have dealt a blow to a number of theories that many cryptocurrency users find attractive whenever BTC prices rise or fall independently of the traditional stock market:
This price action seems to be a blow to the two stories that Bitcoin proponents frequently mention. First, it is an incompatible property class. And secondly, Bitcoin behaves like stocks in uncertain times, meaning it is now positioned as a risky asset rather than a safe haven.
Similarly, Simon Peters, trading analyst at brokerage firm eToro, believes that the correlation is primarily witnessed by the ongoing pandemic in the cryptocurrency and traditional markets. Regarding this, he said:
With the corona virus, it is not a geopolitical issue of anyone. It is a global pandemic. That's where I think the argument of cryptocurrencies is in the region where we see a change in the monetary policy of central banks or an increase in liquidity in the market.
In addition to the corona virus, the news site AZCoin News oil outlook also causes markets to collapse. While the world began to catch the flu, to compete with Russia in market share after the production cut negotiation failed, Saudi Arabia added oil to the fire when declaring unlimited oil production, devaluation caused black gold 30% off price. World stock market in the red on Monday 09/03 dark, lost from 7.8 to 11%.
Finally, Brian Hankey, cofounder of Cache, a gold-backed token provider, said that while gold and silver may be looking at short-term losses, they will continue in the medium to long term. be considered at a good investment avenue. In addition, he pointed out that due to various industrial use cases involving silver, precious metals have a lot of potential.
Covid-19 has many false market indicators
Although Bitcoin shows a slight tendency to occasionally start tracking traditional markets – without testing some kind of relative correlation model – cryptocurrencies are still considered an asymmetric asset class.
However, because a flow of value to cryptocurrencies must occur from traditional markets, there is clearly a link there. On this topic, Glenn Benavides, co-founder of the Global Crypto Alliance – an organization of experienced professionals with expertise in business development and blockchain ecosystem – said. with Cointelegraph:
We have seen Bitcoin move positively with Gold and the S&P500 in the past months. Now we see crypto collapsing when the rest of the world goes awry in COVID-19 panic. This does not mean that crypto will start to behave as a fully correlated asset from this point on. But, in my opinion, we can expect some more correlation from now on, when crypto is plugged into traditional markets to provide them.
Speaking of Bitcoin's role as a store of value that can compete with traditional safe havens like gold and silver, Jaian Cuttari, CEO of the BDAM Foundation financial services ecosystem, said Bitcoin had fails to meet its expectations, as many people from within the cryptocurrency community believe that while markets around the world are slipping, the leading digital currency will be able to weather the storm and thus acting as a perfect long-term investment vehicle for many, adding:
This is simply not a viable investment as many believe. Bitcoin is controlled by several major holders. This puts Bitcoin at risk of faster depreciation. This can be seen by 30 billion dollars wiped out in the market in 3 days. This is unusual and shows that the sophisticated sell-offs from large volume holders are bringing BTC back to historical lows once again.
Finally, it mentions that until March 8, Bitcoin was trying to hold most of its value amid strong sell-offs in stocks, oil and most other markets. The only other item that proved to be more resilient was gold, with precious metal trading nearing the highest level in seven years. But recently also sold out mercilessly.
The broader cryptocurrency market finally saw strong liquidation on Thursday and Friday when most of the adjusted cryptocurrencies dropped from 20% to 40%. Finally, Bitcoin followed the rest of the financial market to cope with the coronavirus crisis, albeit with a delay of about two weeks.
Recession is about to happen?
Even before the threat of Covid-19 began to break the supply chain around the world, there was a dim fear that the global financial system was on the verge of a recession. Now that the corona virus has forced some markets to slow down significantly, all experts believe the effects of the global economic downturn are beginning to manifest.
Giving his opinion on this issue, Hankey argues that there is a strong possibility that a recession-like scenario could be real because it is clear that the global financial system is burdened by debt, because the fact that those years of low interest rates drove reckless investment, adding that:
Many stocks have a mysteriously high P / E ratio. It is not clear what the catalyst would be or if it happened. It may or may not be the corona virus. In any case, I think it is very difficult to argue that we have been approaching a major recession.
It is also important to point out that the Federal Reserve's recent $ 1.5 trillion liquidity injection into the market – after Wall Street switches have shut down twice this week. (which seldom happens) – appears to be a clear signal that the corona virus panic is very serious and the global economic downturn is likely to occur.
However, it seems that not everyone agrees with the theory that a bear market is here. In this regard, Cuttari believes that when things stand, the fear of the virus rather than the market downturn is causing all the economic chaos we are witnessing. Similarly, Benavides also argued that a relative crisis is affecting some traditional networks of organizations and organizations, but not the global economic downturn:
I don't see a real recession, but many new strong groups replace old ones, because new forms of value replace traditional ones. In my opinion, Bitcoin and cryptocurrencies will promote a big part of this revolution.
What will the future of the crypto market look like?
With central banks around the world lowering their prime rates and heading towards negative rates, it's hard to think positively about the world economy at the moment.
However, unlike other times in the past when the only way out for them was to depend on traditional monetary systems, this time there was an option to switch to the cryptocurrency market. The cryptocurrency ecosystem serves all global audiences and has provided the masses with peer-to-peer trading capabilities. This makes it one of the useful means, especially at a time when the global economy is facing a potential disaster.
In this regard, Waslen thinks that from the short to medium term, the global market will most likely be determined by cash transfers to the currently besieged industry. He also believes that with precious metals continuing to show steady growth as stocks fall, Bitcoin will also rise and fall with similar macro events affecting traditional markets along with factors. Other as coming halving.
On the other hand, Greenspan said that the current events are showing that the crypto community sees that Bitcoin was never designed to be a solution to the economic downturn and therefore its future. Regarding this ongoing crisis is not entirely clear:
Bitcoin was invented as an alternative to fiat money, controlled by governments and banks. So unless the value of fiat money is suspected, I don't see bitcoin playing any important role.
Finally, Hankey cautiously optimistic that Bitcoin is capable of weathering the storm it is currently facing. He believes that if Bitcoin exists during a major global downturn, it is very likely that its perception and market reputation in general as a legitimate financial instrument will increase even further.
Ton – Luu
According to AZCoin News
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