The first half of 2020 is probably going to be the start of one long chapter in the future history of the world. With the global pandemic, the first on this scale and magnitude in over 100 years, and the subsequent economic and political fallout, the first six months seem to be on the course as the most dynamic one after the outbreak of the Second World war. However, like always in the challenging and difficult historical times, the processes that this period kickoff are still ongoing.
While most are hoping that the COVID-19 coronavirus pandemic had its worst face shown during the end of the winter and the spring, the economic implications are no longer deniable by even the most optimistic forecasts. Instead, all see it clearly now – the world is in deep recession, which is either teetering on depression or already there. The summer months in the northern hemisphere might offer a bit of relief to the current situation as countries emerge from their lockdowns and sectors like travel and tourism get some revenue in. However, there is no issue that the second half of 2020 will reveal the true nature of the crisis.
The same is likely to happen regardless of the appearance of the second wave of the pandemic, even though the second wave would undoubtedly make things worse. In this miasm of unseen and unformed influence, analysts and experts believe that cryptocurrencies, especially bitcoin, will not lay dormant. Instead, they also stand to either suffer or benefit from the circumstances, depending on a range of moving factors.
Goldman Sachs Analysis
On May 27, Goldman Sachs held a presentation that showcases extreme skepticism towards bitcoin. The slides from the presentation were leaked to the public and it shows that the investment bank does not see BTC as an asset class, as well as that it provides very little rationale for any kind of investment. Ultimately, the slide from the report depicts the cryptocurrency as something that is, essentially, too volatile to handle in any meaningful manner.
However, this found a lot of flack from, interestingly, other banking entities working in the traditional financial domain. Swissquote is one of those, and Chirs Thomas, the Head of Digital Assets, provided a point-by-point response to all of these critiques of bitcoin. He also concluded that the report actually does a big disservice to all of the clients of Goldman Sachs.
Thomas believes that much of the hesitancy on the part of not just this investment bank, but others in the traditional financial sector comes from a paradigm shift that is occurring. Bitcoin and a selection of otters cryptocurrencies – of course, not all of the several thousand that exist – are forming a basis for an asset class in its own right.
Swissquote believes that Goldman Sachs is actively ignoring clear and strong foundations of the emerging asset class that is using cryptographic principles as its basic cornerstones. Also, in the coming years, the world will see, as this bank points out, a range of assets becoming tokenized, including the traditional ones. As this takes place, their trading will also become a more democratic and open process.
One of the cornerstone points that the Goldman Sachs presentation is focusing upon is bitcoin’s incredible volatility. As the report showcases, the cryptocurrency price dropped by 37 percent during a single day. That happened to the price of the BTC token on March 12, 2020. However, Thomas’s rebuttal shows that this is by no means a unique characteristic of bitcoin. Just a month later, the price of oil went through a similar setup and ended up in the negative territory. In this short but borderline insane period, companies literally paid other entities to take oil from their storage facilities so that the production process can continue.
During those 24 hours, the price of oil plummeted about 333% percent, making a ten times bigger drop than that of bitcoin. Yet, no one is now claiming that anyone sane would not come anywhere near the oil market. The fact remains that bitcoin also behaves unusually in its price swings, but 2020 is not a good example of that. That is also why the second half of the year holds great potential, but also a range of questions for which no one has any answers. For example, at the end of 2020, Goldman Sachs saw the price of a barrel of oil being at 63 USD. That estimate overshot the price by over 20 USD.
Dangers and Threats
The summer months, if there is no huge and negative change in the behavioral pattern of the pandemic, will see a sense of calmness return to the world. This will include the market as well, as more and more people go back to work and industries like air travel and hospitality get some traction once again. Bitcoin, despite another flawless halving event and many other objective showcases of the stability and longevity of its core concept, remains shunned in the wider traditional financial world.
However, this was the way bitcoin operated long before it gained any mainstream traction. Reports like that of Goldman Sachs will not stop coming in the next two quarters of 2020, but there is also a strong sense of a changing global mentality. What was once all about productivity and efficiency is now also about another different trait – resilience. The pandemic forced everyone to consider just how resilient their business and personal lives are. Thanks to that, there is a feeling that even those who did not care about esports, social media, IT, or any other closely-associated element with cryptocurrencies are now taking an interest in bitcoin. With it, they can also obtain a new level of financial resilience.
This is crucial – while the summer will likely continue with the easing of restrictions and the lessening of the impact of the coronavirus, the fall of 2020 will bring more fear, worry, and instability. This will happen regardless of the existence or nonexistence of a second pandemic wave. During that time, bitcoin once more only stands to profit from further adoption by many who are presently completely new to the crypto markets.