How’s the Traditional market doing?
What makes this crisis different from all the previous ones is that it is not a demand crisis but a supply crisis. By closing down commercial activities, paralyzing the production and supply system, the Coronavirus could lead to a unique economic crisis.
Traditional markets are seeing great losses in the last few days. Due to complications in negotiations between Saudi Arabia and Russia, the price of oil has dropped by 20% compared to the previous session, reaching $34 on March 9.
The Dow Jones Industrial Average on March 9 was in the red by 6.9%, one of the sharpest daily contractions ever, while the UK FTSE was down 7.7%.
How’s Bitcoin doing?
On the crypto front, we don’t see a much better scenario, but there are perhaps different potentials.
The trend of bitcoin since the beginning of the year, in fact, appears to be descending and seems to coincide with the spread of the virus. Some support the hypothesis, however, that the contraction of bitcoin is not due to the virus, but to a sale-wall planned by the PlusToken pyramid scheme.
In fact, if you look at the trend over the last few months, the value is still very high compared to mid-December 2019 and despite the crisis, our BTC is slowly going back up (March 10).
If the sudden dump of bitcoin was really caused by a criminal organization and not by the widespread crisis linked to the coronavirus, it could be yet another confirmation that the crypto market is independent from the performance of the Stock Exchange and traditional markets.
After all, BTC and altcoins represent a decentralized market, that is not anchored in any way to traditional assets such as gold, dollars, stocks and bonds. The Coronavirus could finally bring to everyone’s attention that in situations of global crisis the “centralization” of production, information and resources causes a chain reaction that completely paralyzes the global economic system. In this sense, the “vaccine” brought by Bitcoin is to demonstrate that decentralization is not only an option but a necessity to cope with large-scale collapse situations.
Key factors for Bitcoin
Bitcoin has perhaps been saved by the “safe-haven” narrative, according to which bitcoin would be an asset of refuge in times of financial crisis. So right now investors are studying very carefully the behaviour of the so-called Digital Gold.
Ethereum CEO Vitalik Buterin invites everyone to keep their eyes open, pointing out that 95% of the articles published on an immediate BTC pump or dump are fake news.
One thing’s for sure: this period of recession induced by the coronavirus will be the first real test for Bitcoin, which has never experienced the crisis of 2008, having been born in response to that very crisis in 2009.
Bitcoin coronavirus #trending
There is a further link between the phenomenon COVID-19 and BTC, in fact, Google Trends shows that the search using the keywords “bitcoin coronavirus” has outperformed in the last two months the combination “bitcoin halving” especially in European countries: Austria, Ireland and Switzerland are the top 3.
Another factor to observe is the Options Skew Indicator, a value that expresses perceived risk and volatility, which has increased significantly in the last 7 days. According to some traders, this indicator is directly related to the level of fear among investors.
The recent decline of Bitcoin is certainly related to the sudden collapse of traditional markets, not because they are technically and effectively interdependent, but because the COVID-19 has created a global panic situation where all small to medium investors, both in crypto and traditional assets, have sold as much as possible to generate liquidity.
Just in the U.S., panic among investors caused stock sales and an increase in the purchase of safe-haven assets such as gold. The value of U.S. equities fell dramatically, resulting in the worst week since 2008, while the price of gold has risen to a level not seen in seven years.
The price of bitcoin, on the other hand, seems to have suffered an initial decline, but in the same week, it recorded a change in trend and went up again, dragging with it the other most popular cryptos.