The biggest cryptocurrency in the world lost a lot of its image that it can act as a safe haven for assets in times of financial crisis. Bitcoin dropped by 50 percent during the previous 48 hours and 30 percent of that took place on Friday. This places the cryptocurrency in its weakest position since March 2019. On that day, BTC price dropped to below 4,000 USD even though it began its week in the 9,000 price range. The coin quickly recovered to about 5,400 USD with the close of the US markets.
The bitcoin futures did not have a better time either. They saw their worst week since they came onto the scene in December 2017, when they managed to push the price to record highs. With that dark record, it was clear to everyone that cryptocurrency as a whole was in a very precarious position, just like the rest of the global economy. The notion of treating bitcoin as digital gold was, if not shattered, very much threatened by the same turn of events. Thanks to the coronavirus pandemic and issues it brings about, the same bad period for crypto is likely only just beginning.
Bitcoin Trading Levels
This digital currency had an otherwise solid start to the new year, just like other major ones, including the ethereum network token, ETH. Bitcoin has been trading around the 10,000 USD mark during most of February. The drop began some weeks later with the slide of the global markets. All of that was related to the issue of the quickly-spreading virus and its effects on the global financial markets, but entire economies and supply chains.
Now, analysts believe that the drop of bitcoin is related to a general issue that has been seen in many quarters – the funds are making their dash towards the safety of hard cash. In other words, investors are taking their assets and liquidating them for cash that they can use to weather a storm, or at least try to do the same. Thanks to the clear and strong decline, many are now questioning the status of bitcoin as a safe haven that is not correlating with the wider economical situation. Right now, this correlation seems to be very strong and in line with other asset connections.
Wall Street Sell-off
The nosedive that bitcoin had taken place amidst a very volatile trading day on Wall Street. The same day was also a part of a hard week for the global economy and especially its markets. On Thursday, March 12, the stock around the world saw the worst day since the so-called Black Monday, the market crash of 1987. On Friday, stocks rose fast, especially in the afternoon hours. This came after the news that the fiscal stimulus from a range of governments around the world. The same was the biggest piece of good news for the markets and the economy in a long while.
It means that the governments are ready to use their reserves to prop up the economy. Presently, many of its elements are buckling under the weight of the coronavirus outbreak and no one can tell when its final end can be expected. Instead, the harsh quarantine measures that countries like Italy are introducing are putting the global financial state in the form of a chokehold. There, it is under assault from two different vectors. The first is the uncertainty that the virus brings about and the other is the problems that are coming out of the way many nations are combating it with an ever-rising determination.
The Longevity of the Virus
Clearly, the stock markets and many other quarters of the financial world are looking to find out when will the coronavirus outbreak be over. With the virus subsiding, along with the numbers of new infections and deaths it brings about, the state of individual nations, especially those hardest-hit, could slowly return to normal. The same is true for the entire world, which is slowly but surely moving to a point of a virtual stand-by where the economy is suffering on the account of stopping the spread of the virus.
Naturally, the simple fact of reality is that human lives take precedence over profit and that there is no other way of going about it. Yet, the damage to the economy on both micro and macro scale is continuing to rack up and the markets are reacting to that. This is mainly seen in the lowering of the Chinese product output, which is now the main supplier of many of both goods and raw materials for the rest of the world.
Like in the case of social media, esports and many other facets of modern life, the society of 2020 is very much interconnected and mutually dependent. The state of those connections is not volatile and the viral picture remains bleak. While some are pinning their hopes on the summer months when the UV radiation from more sunlight could curtail the rate of infections, others are not sure how big this factor could be. At the same time, a vaccine is still about 18 months away and it is an almost certainty that the viral outbreak, even if it drops significantly during summer, will be back come fall and wintertime.
Series of Quarantines
As countries slowly begin to enforce stringent travel restrictions and put their own populations on lockdown, the capital exchange is also effectively dropping down. Fewer people are buying anything and spending less time in and around businesses where they can leave money. The aviation industry is already reeling from the travel restrictions, followed by the hospitality sector.
Many countries around the world are heavily dependent on their tourism industry and now, it looks like 2020 is already a complete disaster in that regard. There is no way that cryptocurrencies can be immune to these events in any case. Instead, their fate now appears linked like anyone else’s in the economy, to the shape and form the coronavirus pandemic will take and what will be the national and even global responses to that process.