After a brutal drop in March, the prices of Bitcoin and other cryptocurrencies quickly recovered, but could these assets, and especially Bitcoin, withstand a second drop if the economy collapses again?
With the arrival of COVID-19 and the subsequent paralysis of businesses and companies in almost all areas to prevent the spread of the virus, the world economy suffered a great setback causing serious and serious economic damage at all levels. The drop in the value of stocks, gold, oil and many other traditional assets was brutal, and even the stock market cryptocurrencies, was seriously affected with the arrival of the pandemic.
Although, for many it is not a secret that the leading cryptocurrency on the market, Bitcoin, still suffers from great volatility, the abysmal drop in the prices of this cryptocurrency during the month of March caused great concern for users and investors. Bitcoin, which had started the month with a value close to $9.000 USD, fell by more than 56% to a value close to $3.900 USD per unit; a value that has not been seen in cryptocurrency since January last year.
Still, despite this incredible and unexpected plunge in value, Bitcoin managed to recover just as world governments began delivering billions of dollars in monetary stimulus. So in a short time the price of the cryptocurrency once again had a relatively stable value.
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Debate on the current economy, Bitcoin and cryptocurrencies
If the arrival of the global pandemic in the month of March was of any use, it was to prove the truth about the concept of Bitcoin as haven of value. Although users and investors were able to have a vision of how this cryptocurrency can behave during a crisis episode, and based on this, several consider that the concept of “haven of value” has collapsed, it must be remembered that the true value of Bitcoin is far beyond the price that the cryptocurrency may have at any given time.
Not for nothing is Bitcoin considered the new digital gold or the gold 2.0. Furthermore, Bitcoin is a type of non-correlated asset, so in reality the rises and falls suffered by other traditional assets in the market do not necessarily have to be reflected or affect the price of the cryptocurrency. But then, perhaps it is appropriate to ask ourselves Why did the price of Bitcoin crash in March?
The spread of COVID-19 globally did its thing, crossing imagined economic boundaries, infecting billions of people and causing a degree of uncertainty and financial fear similar to those experienced in previous recessions. The new economic crisis caused by the pandemic caused serious havoc in the stock markets worldwide and, from this catastrophic event, cryptocurrencies did not escape.
The opinion of several experts in the market reflects that, as trust in cryptocurrencies is still growing and developing, the first drop in prices in the midst of the crisis filled users with fear as they perceived the existence of a possible systemic risk, which is why that many users were seen selling their assets.
Where is the true value of Bitcoin?
Despite the drop in the month of March, many in the crypto community remain positive and optimistic about the future of Bitcoin. Even during a poll conducted by DiarioBitcoin through Twitter, it was revealed that more than 41% of users stated that they would not sell their bitcoins, but rather would keep them in “hodl” until the cryptocurrency rises in price; something that demonstrates the confidence of many users in Bitcoin as a haven of value.
For their part, several investors, traders and cryptocurrency analysts also stated that a bullish scenario for Bitcoin is possible, even if the crisis worsens or a new recession occurs that once again collapses the value of traditional assets. And it is that he Bitcoin value It is based on the way it works, a decentralized, immutable and transparent technological feat; in the resistance and stability of the network blockchain backed by thousands of nodes distributed around the world; and, in its incredible qualities, which in many cases surpass those of fiat money and gold.
Thanks to these potentialities, the cryptocurrency can be seen and positioned as a refuge of stable value in the medium or long term, guaranteeing the protection of the value of the stored funds against the imminent devaluation of the fiat currency.
Global economic outlook
The depreciation in the value of traditional currencies in several economies of developing countries is causing Bitcoin and other cryptocurrencies to be used as a value exchange system, as a refuge and as an investment good. Now, the possible scenario of a new decline in the economy, where the fiat currency and its purchasing power would be devalued again by the printing of billions of dollars without control, could lead Bitcoin to position itself as a safe protection of value.
We are not talking about a new immediate and unavoidable fall in the world economy, but about the existence of a certain probability that stocks and values will fall again. The COVID-19 pandemic is nowhere near over; After 6 months of uncertainty, several governments around the world are once again considering the cessation of activities and the suspension of jobs due to the growing number of infected and deceased people due to this virus, which unfortunately already exceeds 13,7 million people. infected and more than 580 thousand deaths.
Likewise, the economies of countries such as Singapore, the United Kingdom and the United States contracted significantly during the second quarter of 2020 and their recovery has been quite discouraging according to the levels projected by analysts. For example, in the United Kingdom, the Office for National Statistics indicated growth in gross domestic product (GDP) of only 1,8% during the month of May, a figure well below what analysts expected.
So far, the price of Bitcoin has not been affected by the new measures, and remains relatively stable although with slow growth, fluctuating between $9.000 USD and $9.200 USD per unit as of the date of this publication.
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