The equity markets of the financial spectrum came crashing down on 12th March, Bitcoin and other cryptocurrencies reciprocated the movement as prices collapsed.
The cryptocurrency market experienced a significant drop with $90+ billion getting washed off the market. The week has been filled with heavy selloffs and we have something to blame. With coronavirus pandemic causing chaos all over the globe, the fear of potential economic instability has resulted in panic selling amongst investors. Nevertheless, a market that’s oversold always faces a trial.
The crash wasn’t “unexpected” to most in the space. It was the result of an extended bull market and a global pandemic crisis. The crash had nothing to do with Bitcoin’s price in the coming months and here are 3 reasons why the current bear market won’t last like the previous one.
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Uncorrelation with the traditional financial market
As contrary to many opinions Bitcoin’s price is uncorrelated to the stock market movement and for that matter, any other asset class. Data proves this, in the past 12 months, Bitcoin has not exceeded a correlation above .3 and lower than -.3.
Analysis reveals how Bitcoin might be an uncorrelated market as compared to the rest. It has its own financial ecosystem wherein things happen differently than the traditional market. Now, investors that move to this space are shifting without any particular correlation to the stock or commodities market.
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Halving is less than 60 days away
The third Bitcoin halving is due in May ‘20 after which 50% fewer BTCs will be generated, possibly changing the value of Bitcoin. Once halving is done, miners who aren’t profitable anymore leave the network and this is when the remaining miners continue to mine to a level where they only sell their BItcoins at a higher price, eventually increasing the price of Bitcoins economically.
After the first halving of November 28, 2012, BTC prices rose from $11 to $1,100 under one year – the highest ever. When the second half took place in July 2016, Bitcoin was in the $600–$700 range before it hit $20,000 in the great bull run of 2017.
It is impossible for Bitcoin prices to not rise up after a halving, because if the miners stop, the network collapses and no one is ready to give up their Bitcoins, just yet.
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Crypto market is agile
With the stock market crashing and current coronavirus pandemic sucking out the life of the traditional market, there’s only one market that’s agile enough to recover the fastest – the crypto market.
The market is known for its volatility. It is based on technical developments and adoption. With the current shut down and especially lockdowns in countries like Italy, people can’t go to banks. Online payments might decline and there wouldn’t be any customer support executive to handle it. When centralized payments fail, the need for decentralized payment increases. Next thing you know, the economy plays its game with the demand and supply.