Price Retracements as Markets Face the Coronavirus Woes
Price retracements have been witnessed in numerous sectors, including the cryptocurrency markets. Sliding bitcoin prices pose questions as to whether the cryptocurrency is really a safe-haven commodity. As a consequence of many factors, like the coronavirus, the economies have encountered major obstacles to the sustainability of their financial systems.
For many, bitcoin is an escape but for some, doubts arise as to its viability in these trying times. Contrary to expectations of investors, premiums for bitcoin declined as concerns regarding coronavirus rose.
This ensures that its price is not influenced like that of other types of assets that are undergoing major market shifts due to macroeconomic and microeconomic factors.
Many people misinterpret Bitcoin’s categorization as uncorrelated as being a completely fire-proof asset. However, as history shows for most assets, they are bound to experience similar downturns to other assets at one point or another.
Bitcoin Halving Saves the Day
As the bitcoin halving event approaches, an opportunity arises for bitcoin to prove itself as a safe-haven currency over months and years.
It’s done so before and it is sure to do so again. Short-term fluctuations and adverse changes in prices are inevitable, particularly given that many economies are still gravitating towards a cashless mode of operation.
Before the coronavirus episode, many countries struggling with failing monetary policies found themselves Bitcoin has acted as a secure refuge currency in nations where socialism has run its course, and with the digital economy rising and more nations pressing for money digitization, liquidity in the bitcoin markets is expected to increase dramatically.
Bitcoin investments like other investments are bound to face pressures to collapse at some moments of time like other asset classes. This should not be a reason to write it off as a safe-haven asset.
For thousands of years, gold has become a safe-haven asset but has also faced its testing moments. Bitcoin has had little time to prove itself as a worthy contender to gold but has still been able to attract billions of dollars worth of investments in a short period of time.
The dropping rates experienced in recent times is presumably a product of poor hands worrying about the impact of coronavirus on cryptocurrency markets. Also, the source of shocks on cryptocurrencies may have been an oil output battle.
History Repeats Itself?
Others have speculated that a lack of liquidity in financial markets could exacerbate liquidity problems in the cryptocurrency markets. Investors that have investments in both equity and cryptocurrency markets may need to adjust their holdings after experiencing stock market declines.
While political uncertainties in Venezuela were increasing to all-time peaks, the government launched a cryptocurrency remittance program that can be used to transfer Bitcoin and Litecoin. The service was part of a development program for ensuring financial security and social safety for the Venezuelan people.
Bitcoin prices grew to all-time peaks in Argentina when they hit $9,000 while the Argentine peso plummeted in value. One Bitcoin at one stage worth 394,000 ($8,762.95) pesos, breaking the all-time record of $20,000 reached in 2017.
Bitcoin is now a must for citizens with their back to the wall, rather than an option. Countries with little economic recovery opportunities resort to cryptocurrency to have alternatives. Bitcoin is at the forefront of several alternatives to crypto-currency in the financial economy. Bitcoin is an opportunity for millions around the planet as a secure refuge.
The cryptocurrency is looking more like the global currency of the future as the USA injects $6 trillion into its economy with its stimulus package. With the USA shooting itself in the foot, bitcoin may have another bow added to its arrow. Let’s hope this bow strikes right in the middle of the fallacy of fiat.