How is the rise of popular cryptocurrencies explained by almost 10% during market turbulence due to coronavirus? Is it considered a 'safe haven'?
Theories and opinions can be overthrown. Experiments, never. Without experimental evidence, without constant research and verification, economics are reminiscent of equations rather than physics. And we don't want that. At least not when it comes to investing our money. So let's take a look at the evidence about the impact of the fear of coronavirus on the stock markets.
We'll see how the ETF of the S&P 500 (SPY), the healthcare industry by the Health Care Sector SPDR (XLV), the Eurostoxx 50 (DBXE), one of the largest eurozone companies, reacts to the iShares MSCI China (MCHI). , emerging markets from Vanguard FTSE Emerging Markets (VWO), gold from SPDR Gold Shares (GLD), MSCI All Greece Select for Greek Equity (GREK) and Grayscale Bitcoin Trust (GBTC) for Bitcoin. From January 23rd, when the first quarantine in China was declared, to the end of the week we had a panic-stricken day (February 28th).
As we can see, Bitcoin is clearly ahead of the odds race, with gold second. For gold it was rather expected to be in positive territory. It is considered a safe haven in times of crisis, although as we can see, it is difficult to convince. Bitcoin, though? Where does it turn out to be so durable? It even climbed yesterday along with the rest of yesterday's strong uptrend, closing at $ 10.35.
There are many answers we can give, but we will focus on two main reasons: the scarcity and absolute ownership of the property.
The Central Banks now know what they will do. They will start pumping liquidity into the system as if there is no tomorrow. But if there were no crisis, they would still do the same thing, just in smaller quantities. It is historically certain that non-performing currencies (such as today's) are constantly increasing in quantity and reducing their purchasing power. The slower the rate of growth of a currency - and therefore the harder the currency - the greater the motivation for one to own it, because it comes out in the long run. That is why in many countries that have been tempted by print, their residents prefer to hold hard currency, gold or other reliable assets.
It may sound paradoxical because it is a digital element, but Bitcoin is even rarer than gold. It is projected to increase by 15% over the next 25 years, compared to the existing quantity, while gold is projected to increase by 52%.
In addition, buying and selling in gold is limited by its physical form. You have to pick him up or hand him over. Something that is not always easy, safe, comfortable. If you want to keep it in electronic form then it is no different from conventional currencies or traditional stocks. Your property is in the hands of a bank, with all the benefits or negatives it entails. In Bitcoin there is no custodian or even tomorrow, it will not be mandatory. It is easily, instantly, seamlessly, safely transported, such as an e-mail.
The problems that Bitcoin seeks to solve, namely providing a form of money that is under the full control of its owner and is likely to hold its value in the long run, is as old as human society. One of the reasons Bitcoin has been invented and spread is that it gives you the opportunity to have cash in any case. Even if the banks refuse to give you what they owe you, either because they are dictated by the government or because of weakness.
Deposits in the EU are up to € 100,000, even if the bank where you are a customer locks. Indeed there is such a law, but reassurance is more psychological than essential. In case of a systemic problem, who can be sure that his money is secured? No bank in the world has enough money in its funds to cover depositors if they want to make massive withdrawals. Contrary to the universally accepted myth, no state can guarantee its entire banking system if a general problem arises. A bank is enough to be the first girl to throw the rest.
Not that you can't get trapped in the stock market. We do not mean to waste money on wrong choices, but simply to close! The whole of Wall Street didn't open for a week after the attack on the Twin Towers. But the cryptocurrency market is so structured that it can never close. Neither on weekends, nor on public holidays, nor after natural disasters or warfare.
The market today
As we can see in the 4-hour chart, the $ 8,500 support held. But Bitcoin's price showed a weakness in its reaction to breaking the blue sidebar. There has not been a peak higher than the previous one, so we do not yet have any reliable indication that it is starting to rise again. Maybe he does it with the second attempt that is going on.
