- Bitcoin makes some stronger pushes towards recover with a daily high so far at USD 8,770
- As Bitcoin slides down alongside traditional markets like stocks, there is stronger argument to say it is less and less correlated to the movements of traditional markets in times of crisis
After spending most of the weekend below USD 9,000 Bitcoin markets are slowly but steadily showing some signs that a recovery is imminent, after trading above USD 8,700 for most morning hours in Asia and now recording a daily high so far of USD 8,770 (CoinDesk).
Though we’ve said it before on BitcoinNews.com, we will today take a look at some coronavirus-inspired happenings, as stock markets in the USA continue to bear the brunt of fears related to the health crisis, with many investors now believing that the US Federal Reserve will bring down interest rates even more to help stabilize the economy and markets.
The question remains for many, who see Bitcoin either as a crisis hedge or a safe haven asset, if these people in fear will turn to Bitcoin. The safe haven argument appeared to gain traction when political unrest in Hong Kong turned the tide for crypto, with record trading volumes seen in the weeks of violent protests. The same could be seen in Iran, with tensions rising against the US also seeing a correlation in increased Bitcoin demand and price. At the same time, stocks and fiat lost value in each of these.
But when coronavirus fears sent shockwaves through traditional markets, Bitcoin and crypto took a tumble as well, and so the questions are asked: is Bitcoin really a safe haven digital asset?
And perhaps more importantly for Bitcoin price, will investors really look to Bitcoin in all types of crisis those investors turn to bitcoin (BTC) as a crisis hedge remains to be seen. In Iran and Hong Kong, people needed an alternative currency. Governments were tracking personal accounts in Hong Kong to identify protestors. In Iran, the rial was sanctioned. But in coronavirus, fiat is not being affected in terms of daily use.
So if the Federal reserve does lower rates, then income-yielding assets such as Treasury bonds look less attractive. Yields on 10-year US Treasury notes already slid by 0.15 percentage point to a new record low of 1.14 percent, and bond prices went in the opposite direction. Digital Asset Research, a crypto analytics company in New York, explains via co-founder Greg Cipolaro:
“As interest rates decline, you’re more likely to tip the seesaw toward assets that don’t have yield, such as collectible assets like artwork or gold or Bitcoin.”
For now, it does look like as if Bitcoin is just as vulnerable to selloffs like traditional markets, and more experts now begin to say that Bitcoin is rather uncorrelated with other asset categories.
One fresh article by legal experts and economics at crypto consultancy AmaZix says that the lack of price correlation proves what has always been known: that geopolitical events do not affect Bitcoin’s price. It suggests that Bitcoin could even have turned from alternative cryptocurrency “black swans” into more accepted, more recognized “white swans”. The blog post explains:
“Perhaps, after all, in spite of the great Bitcoin supporters, the cryptocurrency born from a mysterious character who has since disappeared into thin air, has become over time, like many other assets, a normal white swan. This may partly be a consequence of the creeping assimilation of crypto to the world of traditional finance (bitcoin-based futures, large companies like JP Morgan evaluating Bitcoin investment options, etc.).”
Nevertheless, the global and long-term repercussions could still be an interesting piece case for argument and that the event is a welcome test of sorts to see just how far Bitcoin has matured as a global currency and asset:
“Certainly this 2020 (a leap year for the superstitious), will be the first real long-term test for Bitcoin as the worldwide “fear” unleashed (rightly or wrongly) by the coronavirus has inaugurated the most interesting stress test for the original cryptocurrency since its conception.
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