· After dipping back down to sub-$6000 prices yesterday, BTC is now up by more than 10%
· Market capitalization up by more than $14 billion for the crypto market
· Crypto breaking free from traditional markets after sliding to new lows last week
BTC and other cryptocurrencies once again showed bullish momentum after a rocky recovery following market instability. Due to a variety of factors facing world markets, including stocks, fiat currencies, popular safe-haven assets like precious metals, commodities, and crypto all took a sharp dive to the south on March 12th, 2020, and then again on the 16th. Since then, markets have been in turmoil and have yet to begin their corrective bounces. Until Monday of this week, BTC and other cryptocurrencies were tightly following the price action of virtually every other asset on the market, but that story seems to have changed today. The cryptocurrency markets are now up, while traditional stocks continue to struggle.
In just two days, Bitcoin’s value increased by nearly 20%. On Tuesday, the high for BTC of $6831 from Monday’s low of $5683 represented a substantial market growth. BTC was not alone in its growth as we saw from many other popular cryptocurrencies spreading their wings a bit as well. Ethereum, for example, saw gains of nearly 10%, XRP more than 5%, and the list goes on.
Another sign of strength for the crypto markets is that rise in market capitalization – a figure that describes the worth of every cryptocurrency in circulation. In just one day, we saw a $14 billion rise in market capitalization, pushing the overall number to just over the $180 billion mark.
The effects on global markets from the likes of a worldwide pandemic, an oil war between Russia and the US, emergency Fed rate cuts, and others have stung the financial system deeply on nearly every level – cryptocurrencies included. On March 12th, the crypto markets lost almost $95 billion and prices for some of the worlds most valuable cryptos were slashed as much as 50% in a matter of hours. BTC, for example, went from selling at around $10000 per coin to just above $5000 in a day.
The losses experienced in the world of crypto were eerily similar to those experienced across every other financial market which was a fact that had people questioning the belief that crypto is indeed a safe haven asset. While crypto has always been described as such, being compared to commodities and precious metals, for example, that narrative was put into serious doubt when the crypto market shadowed those of more traditional assets following the recent market instability. Being so tightly bound to the stock market made crypto look like it just wasn’t ready to handle real instability in the global financial market structure even if that is what its primary goal is in many cases.
Now, to the delight of crypto enthusiasts and investors alike, it appears BTC and others are beginning to show why their safe haven reputation was bestowed in the first place. Monday, while almost every stock closed lower, BTC made a strong reversal to the downward trend triggering similar action from altcoins as well.
Zac Prince, founder and CEO of BlockFi, said in a recent Tweet that things are definitely ‘looking pretty good’ for Bitcoin in response to the recent price action and bearish to bullish reversal patterns on the charts.
On Tuesday, global markets gained some traction but only after the mention of the Fed printing an endless supply of US dollars to curb the negative effects of recent effects on markets. The planned stimulus package is set to provide business of all sizes – including banks and other financial actors – unconditional loans to the tune of several trillion dollars. In this unprecedented move to support a deteriorating financial system we can see several red flags that may end up hurting fiat currencies even more in the long run, such as hyperinflation, among others. However, in the short term, there has been some relief in the stock markets.
The long-term effects on the global economy is still unknown and many fear that it will not look like anything we have seen in recent years. Of course, it is too early to make solid predictions based on red flags, but growing unease about the situation is turning people’s attention to non-traditional and safe-haven assets types. Will BTC and other cryptocurrencies be cemented as safe haven assets following current events? It is still hard to say at the moment, but this is the perfect kind of test that BTC needs to take its place as a safe haven asset in the minds and hearts of investors the world over.
It would certainly seem that things are setting crypto up for a big win. There may be a struggle in price action for a while over the next few weeks and months, but as the global lockdown pushes more people to reconsider the ways they hold and spend their money, and as the realities of printing endless streams of cash begin to dawn on people, crypto is going to look a lot more attractive as a more stable asset to hold for the long term. To put it perspective, physical gold and other similar metals have become much scarcer than they have been in years. Time will tell, but we won’t have to wait long.
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