The Problem With Global Economy And Bitcoin

The world could be in trouble!

Ever since the COVID-19 started to infect the world, everything has been put on hold. Countries that chose to go on lockdown put the majority of people at risk of bankruptcy and unable to provide financial support for their families. Other countries that chose to go on without lockdown also put the health of citizens at risk.

Here is a complete analysis of Bitcoin’s performance during the COVID-19 pandemic.

Even though many countries employed different strategies to fight the global pandemic, at least we all can agree on something. This pandemic has been very bad for the economy, and we can only hope to see the light at the end of the tunnel soon.

Now, here comes the more interesting question. What does this mean for Bitcoin?

Bitcoin has been doing well in 2020

Well, let’s start with the most obvious narrative. Bitcoin has been doing well in 2020 (so far). Despite the fact that the price crashed in early March, it’s generally been doing well ever since. Many cryptocurrencies (altcoins) have been doing even much better than Bitcoin since the rise of the DeFi industry a few months ago.

Find out everything you need to know about Defi.

After the Bitcoin halving that took place back in May, BTC price has been steadily going up. Although it has its own ups and downs, it’s been doing quite well compared to the stock market and physical metal like gold.

Many people attributed the rise of BTC to the US Federal Reserve. Yes, the Fed has issued stimulus packages worth trillions of dollars to help Americans during the pandemic time. However, these trillions of dollars were printed out, and it might cause severe long-term damage if things get out of control. This is why many investors put their money in the stock market, gold, and Cryptocurrencies, as they understand the need to protect their own money from future inflation.

Because of these actions, we can say that BTC has been directly pumped by the coronavirus pandemic. People start to assume that BTC has fulfilled its objective as a hedge against failing fiat currencies.

So, What’s next?

Despite the fact that BTC has been doing well in the time of the global pandemic, we still don’t know what’s going to happen next. It’s understandable to think like this because we also don’t know what’s going to happen to the global economy. Governments all around the world have been toying around with the idea of reopening the economy.

Let’s take Bali as an instance. This Indonesian’s popular island has been quite dependent on tourism. Earlier, they announced that they would open up to international tourists starting this September. However, this plan has been changed yet again until the end of 2020 due to coronavirus fears. Many other countries and popular tourist destinations have also changed their plans over and over again for the same reason.

And it’s not just about tourism. Everything else is also affected. When you cannot find too many purchasing powers, the businesses would suffer, even if you don’t have lockdown anymore in your country or region. Unfortunately, the price of BTC would also be dependent on the world’s recovery from the current crisis.

BTC’s correlation with Gold And the Stock Market

While all of the three (crypto, stock market, and gold) have been doing generally well this year, they are not always correlated. BTC doesn’t usually correlate with the stock market but things have been pretty close since the flash crash in early March. It was interesting to see that both BTC and the stock market were dumped and then recovered gradually ever since.

However, the two haven’t correlated this closely in recent times. BTC went down several times in the past few weeks while “dow jones” has been relatively stable. On the other hand, Gold has been moving in similar directions with BTC. Interestingly, BTC did not actually follow gold’s price at the beginning of the year.

Read about Bloomberg’s crypto report about Bitcoin increasing as high as $20,000 before the end of 2020.

So, what will happen next?

Nobody knows for sure, but it looks like BTC will be able to keep its upward momentum (same as Gold) as the world’s economy remains in uncertainty. When there are more people buying Bitcoin, you know the trust in fiat is gradually declining.

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