June 22, 2024

Why will bitcoin benefit from the financial crisis? Experts answer

In recent weeks, the global economy has been tested for strength: the collapse of stock markets amid news of...the spread of coronavirus outside of China,the threat of inflation due to disruption of established supply chains and a potential increase in consumer prices. The panic was partially transmitted to the cryptocurrency market.

ForkLog learned from experts whether Bitcoin will be able to prove itself as a protective asset in the current situation or whether its price will accelerate the fall.

Leonid Matveev, Head of Trading Analytics at Waves Platform:

In my opinion, most professionalplayers on exchanges consider bitcoin a high-risk speculative tool. The world's leading stock indices until recently stormed historic highs, which means that players were willing to take risks. To diversify risks, part of these speculative funds also passed to cryptocurrencies.

Now we see a different picture. Markets froze in anticipation of the development of events with the coronavirus. Most of the players chose to avoid risk and chose to transfer funds to the cache, as well as US government securities. Against this background, bitcoin also lost value. In my opinion, the hysteria in the markets will soon stop, and the markets will stabilize, as will the price of bitcoin. The bitcoin price will also be positively affected by the expectation of a halving.

However, in the near future uncertainty will reign in the markets. Under these conditions, stablecoins can be a good solution.

Alexey Markov, leading trader of United Traders:

Investors in the financial market are confused, because it is not clear what to expect further from the coronavirus epidemic: when the medicine will be developed, how long it will last, where new infected ones will appear.

On the other hand, in the third month after the start of the epidemic, there was a certain addiction to bad news. Perhaps, partly over the situation, long expectations of the beginning of the financial recession overlapped.

All this is reflected in defensive assets. Bitcoin fell from the highs of mid-February, but its price is still higher than by the beginning of the year by more than 20%. Gold is growing as uncertainly. The current drop in Bitcoin prices is natural against the backdrop of the stock market recovery, which began this week. To some extent, the news about the legalization of bitcoin in Germany helped the crypto market.

Mansur Huseynov, an independent cryptocurrency expert:

In my opinion, bitcoin is behaving now,rather, as a risky asset. Its correlation with US stock indices is higher than with gold. I think this is due to the fact that bitcoin is present in the portfolios of institutional investors. For them, crypto is, by definition, a risky asset. Initially, when bitcoin was bought only by private investors, there was no such correlation with stocks.

However, it cannot be argued that in the currentIn a situation, cryptocurrency price drops are more likely than their growth, as the US Federal Reserve, the European Central and all other regulators will do everything to keep markets in check.

Alexey Kirienko, Exante Managing Partner:

Bitcoin was down last week, as wasmost other assets. However, it is likely that the current downturn in the cryptocurrency market and the stock market crash has different reasons. As early as the 10th of February, a sharp increase in short positions was noted at CME. Then, an important factor in the depreciation was the approximation of expiration of futures. For one and a half months of growth, the rally reduced its momentum.

Moreover, macroeconomic factors nowwork in favor of cryptocurrencies. In quarantine conditions at public and large private facilities, it is difficult to come up with something more reliable than cryptocurrencies that are not exposed to the risks of massive failure of transactions, such as banks. Moreover, even in the period from December 2018 to December 2019, bitcoin brought investors 100% of the annual return. In the future, without a doubt, the Bitcoin exchange rate will increase.

Grigory Klumov, founder of the stable cryptocurrency platform Stasis.net:

Bitcoin will definitely grow. The more money supply is created, the higher will be the demand for assets of deflationary nature.

When a financial crisis occurs, the stateoften saves large companies by providing financing. Where does it come from? The Central Bank monetizes the state's debts, that is, it prints money, increasing its supply on the market. The pressure of the money supply inflates all goods and assets of "finite existence", such as rare and valuable paintings. Bitcoin is an asset that benefits from the financial crisis and money printing.

Read on: How an outbreak of coronavirus will affect mining in China and the bitcoin industry

Bitcoin, gold and the stock market: what does the first cryptocurrency correlate with