The recent outbreak of the novel coronavirus, COVID-19, quickly took over the world in a way most nations haven’t seen since WW2. With airplanes halted due to travel restrictions, most non-essential shops closed, and other business services suspended, the world became crippled by this foreign, unknown illness.
Bitcoin, along with other major global assets, is equally affected by the devastation of COVID-19. 2020 started beautifully for Bitcoin; we saw Bitcoin reach its highest price in years coming up to $10,000 at one point. But in the recent few weeks, Bitcoin took a painful plunge downwards. This was the time when most thought the coin would soar, particularly with the upcoming halving in May.
In mid-March, bitcoin suffered its worst one-day price drop in years and fell from $7600 to $5300, even approaching $4000 at one point. This rapid decline shook crypto traders who could not understand what happened to the safe-haven asset that everyone expected to remain even in the times when the traditional financial system was in turmoil.
How did Bitcoin contract COVID-19?
Cryptocurrency advocates have debated that crypto tokens are idea safe havens for investors, and even while the world’s largest indices painfully decline. Bitcoin and other cryptocurrencies are not subject to the same manipulation as fiat currencies, which makes them more volatile in times of uncertainty. Often, in scenarios of market uncertainty, we see a different reaction from crypto coins. The havoc of global markets usually inspires bitcoin bulls to invest.
But with COVID-19 sparking doom around the crypto world, we saw a different reaction. Once volatility commenced, it became an inexorable race downwards, with Bitcoin losing its ‘digital gold’ status and slowly deteriorating into unknown waters.
Could there be another explanation?
One fundamental issue with cryptocurrencies is that many investors do not view Bitcoin as a currency to use in daily transactions, but instead speculate it and benefit from its highs and lows. The main goal of such investors is to monetize on Bitcoin’s fluctuations. When they notice a bear market trend, they prefer to sell the coin versus keeping it before it achieves new lows.
Bitcoin has seen volatility in the past and its decline; however, the coin has recovered and blossomed. While most crypto skeptics are saying, “I told you so,” BTC supporters know that this not the end for their favorite cryptocurrency.
Where to go from here?
It’s safe to say that the coming months will be complicated not only for Bitcoin but for the entire global economy. As the number of infected people grows and the mortality rate escalates, it seems that the world will soon be facing another major recession. In the past few weeks, humanity has faced challenging times, and there seems to be no light on the horizon.
However, it’s safe to say both Bitcoin and the global economy have been through more. So while we self-isolate, we can reflect on the immense market growth of crypto in the last decade and watch how it unravels in the upcoming year.