The Coronavirus epidemic has caused major fears in countries all over the world. Schools have been closed. Hotel bookings are being canceled, people are not eating at restaurants or attending sporting events, museums or conferences. Needless to say, the economy is suffering.
The stock market is experiencing its worst week since the financial crisis of 2008. Major US index S&P 500 fell by more than 11% in the last week. Dow Jones has been hit with a 12% drop in the recent week.
Gold, which is by many seen as a safe haven of investments, was also not immune to recent market movements. Between 27 and 28 February, in just one day, the price of gold fell by 3% from $1.645 to $1.585/oz.
Bitcoin looked strong, but suddenly everything changed!
The Coronavirus outbreak began in December 2019. For a long time, Bitcoin, together with the majority of the crypto market, seemed unaffected. From the end of December 2019 until 12 February 2020, Bitcoin recorded incredible gains rising from $7.200 to $10.300.
Did Bitcoin just become the safest investment asset while equity and riskier assets are falling?
February 13th and the reversal
After an incredible few months, 13 February came, and although it wasn’t a Friday, it sure felt like it. The market turned red wherever you looked! A good portion of the gains recorded in the previous months was lost as Bitcoin dropped to the $8.600 region on 1 March 2020.
Bitcoin plummeted by almost 15% over the last days, bringing the rest of the market down with it, among fears of a worldwide Coronavirus outbreak.
It looks like Bitcoin is gaining some momentum again as it is currently trading near the $8.800 region according to data provided by KryptoVergleich.
February 26, 2020, and the SEC ruling
Is Coronavirus the only reason for Bitcoin’s recent decline? It is very unlikely. On February 26 the U.S. Securities and Exchange Commission (SEC) ruled against a long-awaited Bitcoin Exchange-Traded Fund (ETF).
SEC rejected ETF applications from the asset management firm Wilshire Phoenix and options exchange NYSE Arca. The Commission released a statement that explained that NYSE Arca did not convince the Commission that “the relevant bitcoin market possesses resistance to manipulation”, a unique feature of the securities and commodities markets.
In the days following the hearing, Bitcoin dropped an initial 6% in value, going down from $9.500 to $8.600.
This was not the first time that a Bitcoin ETF Proposal was rejected by the SEC. In 2017, the SEC rejected an application for a Bitcoin ETF submitted by Bitcoin evangelists known as the Winklevoss twins. The SEC described the Bitcoin market as “too manipulable” in 2017 as well.
It is interesting to mention that NYSE Arca applied for a Bitcoin ETF a couple of times and had its first proposal rejected in 2017. The inability to prevent fraud and manipulation was again the reason the ETF was rejected.
During 2018 the SEC continued closing the door for a Bitcoin ETF. A new record was set after nine applications were turned down in 2018. No positive signs were reported during 2019 either.
What is a Bitcoin ETF?
An ETF is an investment vehicle that allows institutional investors a fully-regulated way to purchase Bitcoins but without having to store and hold the coins themselves. Investors wouldn’t have to deal with securing the Bitcoins in their private wallets because they could trade them on traditional markets just like other assets. A Bitcoin ETF would give Bitcoin the exposure it longs for and deserves.
In the End…
Coronavirus or rejected ETFs… it doesn’t matter. Bitcoin enthusiasts have many reasons to be positive for the year ahead.
In May, the long-awaited Bitcoin halving event is taking place. This event has historically been known to cause new high for the Bitcoin Network and there is no reason history will not repeat itself one more time.
In the 4th quarter of 2020 Bitcoin is expected to undergo a soft fork and adopt Schnorr signatures, Taproot schemes, and Tapscript language which will improve its privacy and scalability.
They have tried to bury Bitcoin many times but nobody has ever succeeded in doing so.
