The value of the most widely held cryptocurrency surged Wednesday, trading near $6,635 after getting rejected just below the $7,000 benchmark before closing. This, after Bitcoin prices had rallied from $5,700 to $6,700 in the previous two days despite major stock markets and benchmarks S&P 500 and Dow Industrial Average took a beating worse than 2008 levels.
The stock market has been in turmoil since the combined impact of the coronavirus pandemic and falling oil prices shocked investor sentiments to utter uncertainty. The coronavirus has already claimed 21,297 lives as of this writing, and has put most nations into lockdown to deter the spread of the disease. As establishments close and events cancel — including the largest blockchain summit in Japan — economic activity has taken a huge hit.
Responding to fears of a global recession, the Dow Industrial Average ended its 11-year bull market run last March 11 as it closes at 20.3% from the February 12 high. Similarly, the NASDAQ Composite Index and the S&P 500 followed suit in bear market territory just after a few hours.
As a knock-on effect, analysis from cryptocurrency expert Glen Goodman highlights that Bitcoin lost half its value on the same day — trading below $4,000 level after starting the week above $9,000. But the nosedive was arrested, with Bitcoin surfacing to roughly $5,400 as of the close of U.S. markets. Experts believe it only needs to break through the $7,000 threshold to continue its rally back to its $10,000 high in mid-February.
Stimulus Package
In response to the global pandemic and domestic panic, the US Congress has recently passed a whopping $2 trillion economic stimulus to temper uncertainty and jumpstart economic activity. The stock market benchmarks have rallied ahead Wednesday following Trump’s announcement of the fresh rounds of quantitative easing. The move is part of the Fed’s $6 trillion stimulus plan to pump value into the markets.
While Bitcoin responded below expectations after the pronouncement, experts note that the stimulus package will have a high long-term impact on the popular cryptocurrency. Bitcoin hedge fund Galaxy Digital CEO Mike Novogratz said, “If there was ever a time — debasement of fiat currencies, monetization of trillions of dollars of debt, this is the time for bitcoin.” They note that the value of the fiat money would crumble after that much money printing, pushing Bitcoin as a more valuable alternative. In fact, even before the pandemic, experts have predicted that Bitcoin value is set to grow 200% over the next two years. But of course, none of them would have predicted such massive quantitative easing as an impetus for a long bull run.
Safe Haven?
Other experts, however, are skeptical – questioning the cryptocurrency’s position as a safe haven for capital flight. The Scotsman argues that banks are in a better position to carry the markets through this crash and the Fed’s balance sheet can be gradually reduced — averting the proverbial ‘flight’ to safe havens. Gold markets, though, paint a different picture. With gold prices soaring despite the stimulus package, Bitcoin investors are confident that a radical shift in trading markets in the long term is looming — and they’re in it for the ride.