As the new type of pneumonia began to break out in Japan, South Korea and Italy, the panic in the global market spread further.
Affected by the epidemic, the three major stock indexes in the U.S. stock market fell rapidly in the short term. The Nasdaq index closed the largest single-day decline in nearly three weeks last Friday. The performance of European stock markets is also unspeakably optimistic. Last Friday, the pan-European STOXX 600 index ended the previous two-week winning streak. The German DAX, the British FTSE and the French CAC indexes all fell.
At the same time, the price of spot gold, a safe-haven asset, hit a new high in recent years. Compared with the strengthening of gold prices, Bitcoin, once considered an "emerging safe-haven asset", has not performed satisfactorily recently.
In mid-February, the price of Bitcoin once broke through the $10,000 mark, reaching as high as $10,500; then the price began to decline. In the next few days, the global stock market did not change its downward trend, and Bitcoin not only failed to play any hedging function, but started a storm-like plunge: on February 25, Bitcoin fell by 3.1%; on February 26, Bitcoin fell by 3.1%. It fell below $9,000, a drop of 4.28%; on February 27, Bitcoin once fell to $8,531, a drop of more than 4%.
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Is Bitcoin still a safe-haven asset?
1. Safe-haven assets refer to a relatively stable asset whose price will not fluctuate too much as the market changes, such as gold, US dollars, etc. Common safe-haven assets include the U.S. dollar, gold, and often overlooked Swiss francs and Japanese yen. Bitcoin, by contrast, is extremely volatile, even more so than traditional stocks.
With the increase in global risk events, buying products with hedging attributes has generally become the first reaction of investors. The main charm of safe-haven assets is to avoid risks, the so-called"buy gold in troubled times"It actually makes sense. The sluggish recovery of the global economy, global monetary easing, sluggish global stock markets, and endless geopolitical risk events have all created demand for safe-haven assets.
2. The development time of Bitcoin is very short, and its impact on traditional finance is far less than imagined. At present, the total market value of the entire encryption market is less than 300 billion U.S. dollars, and the market value of Bitcoin is only more than 170 billion U.S. dollars. The encryption market is too small to bear the hedging needs of traditional financial massive funds.
For mainstream institutions in the global financial circle, gold is a mainstream recognized safe-haven asset. BTC is still a safe-haven asset recognized by the currency circle. Although it is slowly being recognized by some mainstream finance, the proportion is still very small. A lot of money is not pouring into the digital currency space. This is a long process and cannot be accomplished overnight.
3. With the halving of the market as a publicity, people in the circle have been looking forward to the arrival of the halving market; through borrowing, leverage is leveraged to increase the price of Bitcoin. And when the leverage is too high and you can't borrow more money to deposit, the bitcoin market can only enter a volatile or even falling track. Some time ago, the price of USDT in the market soared, and everyone was looking for USDT but it was difficult to find it. This seems to prove this judgment. ——Almost all of these USDTs have been borrowed for leverage.
The plunge of Bitcoin is not because the halving is over, or Bitcoin has plummeted along with the global stock market, but because the leverage of the multi-army can no longer support it. In fact, before Bitcoin and the global stock market plummeted, Bitcoin had fluctuated and fell for nearly ten days.
4. Some investors believe that Bitcoin has little correlation with other types of assets. For example, there is no clear correlation between the price of Bitcoin and stock prices. Everyone has a wait-and-see attitude towards the impact on the Bitcoin market.
On February 28, Federal Reserve Chairman Jerome J. Jerome Powell issued a statement saying: "The fundamentals of the U.S. economy remain strong, however, the novel coronavirus poses evolving risks to economic activity. The Fed is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.
In theory, if the Fed cuts interest rates, fixed-income assets such as U.S. Treasuries will become less attractive to investors, while Bitcoin will become more attractive to investors.
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Bitcoin poised to become a safe-haven asset
When talking about safe-haven assets, you have to talk about gold. Compared with other metals, the total reserves of gold on the earth are very small, and its rarity is high. Most importantly, gold is very stable, will not be oxidized, and can be preserved forever.
Mike Novogratz, CEO of encrypted investment bank Galaxy Digital, said that Bitcoin failed to act as a safe-haven asset this time because of the large-scale liquidation of both risky assets and risk-averse assets.
Bitcoin itself is virtual, and actually has no actual use value. All values are given by people and come from people's consensus. Bitcoin, like gold, is also rare and cannot be artificially modified. In terms of stability, Bitcoin can be said to be the safest and most stable network system in the world because of its decentralized design.
Beishu Blockchain believes that it is too narrow to judge whether Bitcoin has hedging properties from a single event. What's more, all kinds of mainstream currencies are about to usher in a special period of halving.
The hedging properties of Bitcoin are not just imagined. The most typical examples are Syria, Zimbabwe and other countries. Due to the devaluation of legal currency, wars, government credit bankruptcy and other reasons, people convert a large amount of assets into Bitcoin to avoid the decline of their legal currency.
During the dispute between Iran and the United States last year, BTC skyrocketed, rising to more than 10,000 US dollars. The incident continued to ferment, and then BTC also ushered in a short-term surge. It proves that BTC has hedging properties. Affected by this, the digital currency has not been able to usher in a surge in this situation, not to say that it does not have the ability to hedge.
If more people realize the characteristics of Bitcoin, that is to say, the consensus is large enough, Bitcoin will obviously be a very high-quality asset, and the volatility will also be reduced. Compared with other assets, Bitcoin's hedging properties will become stronger and stronger.
Although Bitcoin cannot become a safe-haven asset at present, it still has huge financial value, such as fixed circulation against long-term inflation; such as Defi, which is currently in full swing, is also becoming a traditional financial business giant to provide more possibilities. For the blockchain, eleven years is actually not a long time, and the ecology, technology, and mechanism are still in a state of constant exploration.
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Disclaimer: The information published in this article does not represent any investment suggestion of the company, nor does it constitute any investment advice. The picture is from the Internet. If there is any infringement, please contact to delete it. Please note the source for reprinting.
