Bitcoin: The Ideal Asset Under Global Crisis

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With the global economy rattled as a result of the national lockdown, border closures and supply chain breakages, concerns are rising about local businesses and financial prospects for the future of small enterprises. While investors flee problematic waters, there isn’t a certain opportunity for them to go to.

Bitcoin, which has become one of the newer popular safe haven assets, recently saw a nearly 6% drop in value from steadily trading around the $11,000 mark. However, despite the fall, it’s worth noting that both gold and the S&P 500 fell at the same time, pointing towards an investment market decline overall, rather than simply volatility in the cryptocurrency market.

Comparing crypto to S&P 500 performance

Looking at the technical perspective, the Chicago Board Options Exchange (CBOE) Volatility Index indicates that the implied volatility of the S&P 500 market has seen a dramatic rise in just over two months. Investor experts believe that this could lead to a crash in the market, similar to March’s decline. The Volatility Index rose to above the $30.00 USD mark, which is usually only seen in global events of shock, such as major wars or international crisis related to terrorism.

Bitcoin, despite the dip, has remained more stable than recent years, holding around the range around $10,000 USD steadily.

Recent activity: Bitcoin vs gold

Gold also saw a recent plummet, hitting the lowest mark seen in the past two months. It also does not stands as the only precious metal in the market with silver taking a massive knock. Experts believe that the recent waning interest in the precious metals might be related to investors looking to add U.S. Dollar backed options to their portfolios.

However, this being said, investors have been cautious to turn to fiat currencies as safe havens given the instability of the global economy. The pandemic and the resultant economic obstacles have taken a toll on the world’s leading currencies including the Euro, the Japanese Yen and the Swiss Franc.

Bitcoin’s movement with the upcoming election

It is highly likely that the markets will be influenced by the upcoming election and national debates for the United States presidency. This is especially the case given current US president Donald Trump’s strong aversion to Bitcoin and the cryptocurrency industry. Joel Edgerton, CEO of cryptocurrency exchange bitFlyer, commented on this, saying that the cryptocurrency market might be in for major volatility:

“The price movement is mainly driven by institutional business with retail customers continuing to buy the dips and accumulate assets. A key point to watch is the possible effect of the US election and if that changes the Fed’s response from its current very accommodative stance to a more normal stance.”

Bitcoin investment attractive owing to scarcity

Historically, as the U.S. Dollar sinks, the price of Bitcoin rises. The inverse correlation seems to stand as a mark that investors tend towards the cryptocurrency as a safe-haven asset to hedge against falling fiat prices, but analysts suggest that this might not always be the case. As commented by Sam Tabar, individuals might tend towards cryptocurrency in isolation from the dollar as the digital asset market becomes more prominent. Moreover, he believes that the limited supply of Bitcoin – similar to that of gold and other commodoties – has an impact on the price and movement of the token too.
He offered that with time, “people will become increasingly more aware of the digital asset space, and that sophistication will decrease the correlation to traditional markets… As for commodities and gold especially, I agree with the narrative of scarce resources. Looking at the unique stimulus packages that have been launched in most of the world’s largest economies you could have expected such a move. I think in the crypto space, this narrative only holds for Bitcoin and not for any other cryptocurrency.”

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Disclaimer: All content found on 7bitcoins.com is only for informational purposes and should not be considered as financial advice. Do your own research before making any investment. Use information at your own risk.

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