The cryptocurrency world joined the rest of the markets, hand in hand in the recent series of financial and market collapses. The process shattered the idea that bitcoin is a form of digital gold that would provide investors with a safe haven from any potential general meltdown. The first weeks of March 2020 will go down in history as a period that showed just how incorrect this notion was for the coronavirus pandemic and related worries and dangers.
Now, the 50 percent drop seems to be more or less stable as both institutional investors and traders try to figure out what would be the next steps the crypto networks might take in terms of price and market cap. In the wider ecosystem, many are also trying to make sense of the drop in the value and what it means for the underlying concepts that prop up the idea of decentralized and unregulated cryptocurrency like bitcoin. Presently, the conclusions of those debates, internal and external, seem to be few and far between.
Simply put, it appears that no one is presently aware of what is going on in the broader sense and not just for the cryptocurrency markets. However, in spite of this gloomy outlook for the general global society and its finance and economy, there are some indicators that provide a modest sense of optimism. Some labeled these as the launchpad for the incredible successes that are inbound for the crypto markets. Chances are, the same expectation is more based on wishful thinking than any solid facts, but the optimistic indicators are still present.
The stock-to-flow models examine bitcoin price as a result of the available circulating supply or stock and the new flow or the production output. With its outlook, the present price of bitcoin is below the line that was forecasted, but still inside of the expected thresholds. Furthermore, this is not the first time that the stock-to-flow model showcased such a drop. So, while the same model is not precisely giving out great news indications, it is still presenting a metric where the drop is not as catastrophic as it might seem at first.
In the domain of things like social media, esports, and other online ventures, the damage control that comes in the case of a huge negative event is often as important as any long-term revival. Stock-to-flow might not be a redeeming metric but it is surely less catastrophic than any market cap or direct price value.
Bitcoin Hash Rate
In all of the talks about the doomed nature of cryptocurrency, one thing is regularly missed by the wider public and hostile pundit, and that is the hash rate. This represents the computing power of the mining rigs or computers used to confirm all transactions inside of the bitcoin network. The value of this number has been going down since the start of March, but as of March 12, when the big drop occurred, it began to rise.
Here, the hard-coded nature of the bitcoin network once again starts to shine true – no matter the present situation for the network, the inherent scarcity will continue to rise as designed. This means that the upcoming halving will be on schedule and that the miners have a pretty good idea that even if all events drag other parts of the economy down, mining bitcoin will in May become twice less worthwhile than it is now. Contrary to common sense, this certainty is actually greatly helping bitcoin. In other words, rain or shine, the crypto network behind the biggest digital currency in the world is continuing on with the program.
The number of individual transactions on the bitcoin network spiked on March 12. This is typical of the major changes in the price, especially when that change includes a big drop like it did now. This kickstarted a range of selling moves. Since then, the number of transactions became more leveled and once again reached the old pre-crash numbers. This is showing that many people who are simply using bitcoin as a means of payments and other monetary functions besides investing and trading are still doing it.
The price drop did not make them panic and sell their holdings. Instead, they are continuing to use it like they would any other fiat currency. This is also a very promising sign because ultimately, the reason bitcoin and all other cryptocurrencies exist is to provide a means to an end to everyday users who want to have payment options, especially when traditional ones might be inaccessible.
One of the least tangible but still very important factors here is the so-called social chatter. This represents the number of mentions of any particular cryptocurrencies in the general public and their online communication platforms. In times of crysis, these always go up because the airways get clouded with rumors, jokes, and many other pieces of information. But, just like a death in transaction numbers, a death in chatter would represent a simple but very negative idea for any cryptocurrency, including bitcoin: that people are simply dropping it and leaving the network for good.
Fortunately, nothing like that is occurring, even though the concept of bitcoin as digital gold or a safe haven is, as previously stated, likely dead in the water for now. However, this is not the first overrated attribute the cryptocurrency had in its short but rich history. On several occasions, the same digital token was synonymous with crypto betting, but also with many schemes to get rich really fast.
All of them resulted in different outcomes for different individuals, but today, people still use crypto for betting purposes en masse and many still acquire a lot of wealth through it. This time around, under the impact of coronavirus, a truly once-in-a-generation (hopefully) event, the safety of bitcoin might have not been universal, but it is still a big global benefit to have one such non-national, non-regulated financial network. As time goes by, chances are that stories about people protecting their money using BTC are going to surface as well.