Alright, I've been thinking quite a bit before writing this piece and whether or not I should. However, the more I spend time thinking and looking at what's happening, the more convinced I feel.
Bitcoin is sick. It's caught the coronavirus and chances are that things will get worse before they get better. Let me explain.
Bitcoin Is Not A Safe Haven
First things first, let's get this out of the way. Bitcoin is not a safe haven asset. It has demonstrated an obvious positive correlation with the way traditional assets behave. Everything is crashing and so is Bitcoin.
Now, to make things clear - a positive correlation takes place when two assets behave in the same way. For instance, the S&P 500 goes down, and so does Bitcoin - these two are positively correlated. The correlation would be negative if one goes up while the other goes down.
As you have surely noticed, the traditional stock markets are tumbling tremendously with major indices recording crisis-like crashes.
Whether or not this is caused by the coronavirus and its impact on global economies - there are people smarter than me figuring this out and I have absolutely no clue. There are a lot of people on Twitter saying that markets were already inflated and that the virus was just a much-needed excuse for sellers to begin dumping. I'm inclined to believe this.
In any case, Bitcoin has definitively demonstrated that it's not a safe haven asset, not just yet. Whether or not it will ever become one - I've no clue.
Bitcoin Needs A Cure
I know, I know, you can't cure viruses, their treatments are symptomatic, meaning that you treat the symptoms rather than the disease. However, Bitcoin desperately needs a cure from the current situation if it is to recover.
What could this be? In my opinion - it's absolute uncorrelation. In other words, if Bitcoin is to establish itself as an asset worth serious attention, it needs to be entirely uncorrelated to traditional markets.
It's very important to make the difference between negative correlation and uncorrelation. With the former, we have two assets performing in a certain way which could be correlated, regardless of the fact that it's in the opposite direction. With the latter, the two assets are completely separated and there's a lack of any correlation.
Investors are not looking for new safe havens. They have gold already and while Bitcoin does possess a lot of its qualities, there's a lot of water that needs to flow for it to replace it.
Investors (in my humble opinion) are looking for assets that give them exposure to serious opportunities. Money-making opportunities. If Bitcoin is correlated, in any way, it means that it's limited. Complete uncorrelation, on the other hand, shatters these boundaries and frees up the leeway for the possibilities that investors are looking for.
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