Central banks in Europe and Asia are busy, to inject billions of dollars of liquidity to keep the stock market afloat. As Bitcoin is described by many as a safe haven, this contributes to the dynamics of the dominant cryptocurrency at the ends.
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A risky Bitcoin is actually Good?
Coincidentally, there were several big-bear cycles in the case of Bitcoin, such as in December 2018, as the BTC price has fallen amid increased geopolitical risks and a global economic downturn on 3.150 dollars.
2018, as the trade dispute between the United States and China reached its peak, dropped the Bitcoin price to a 50 per cent reduction within two weeks on the 3,000$mark. To be recorded this time, the stock market net outflows in the record.
Nothing supports the argument that Bitcoin is a risky or a risk-free asset. In the past three years, Bitcoin has shown, although tends to be a correlation with Gold.
But in the last 12 months, the Coin has both a lower and in a higher time frame in the opposite direction from the Gold moves.
Ben Davenport, co-founder of the leading fiduciary company for digital assets BitGo, believes that at the current time it is difficult to categorize Bitcoin as an investment, with or without risk.
Davenport, according to the Bitcoin impact on the price mainly due to the Margin Trading via platforms such as BitMEX, and Binance Futures by whales.
Davenport noted this:
“Bitcoin is post to this point, neither risk-on nor risk – off is active. He’s marching, still in the best shape. The actions of the whales and the Trader with leverage are far more concerns, more meaningful than any Macro.“
The lack of correlation between Bitcoin and the broader financial market reduces the potential impact of macro events on the price of the crypto currency. However, if the General market mood, and productivity increases as a result of increasing liquidity, it is more likely that the inflow in high-risk investments is increasing.
To give Central banks (who have so far refused to impulses to ensure the sustainability of the long-term economic growth) start of strong stimulus packages to boost the world economy, hang up.
The outbreak of Coronavirus, which threatens to be a real global pandemic trigger, has caused in the financial market a degree of fear not seen in the last ten years.
If this fear is with some of the greatest economy is accompanied by packages of the last few years, it could arouse the appetite of investors to riskier asset classes, including individual stocks, and even Bitcoin, again.
Will BTC ever be like Gold?
So Bitcoin, like Gold, can achieve a certain degree of inverse correlation with the stock market and the financial sector, he must have a much larger market capitalization than it is now.
Currently, Bitcoin is valued at only 161 billion dollars – less than three percent of the value of Gold. Consequently, crypto-currencies are still considered an emerging asset class with limited support from financial institutions considered.
It could still take a few years, until Bitcoin has reached a larger market capitalization, price stability and a more robust infrastructure to act as a potentially safe haven.