On the off chance that you’ve been in Bitcoin (BTC) long enough in all likelihood its Genesis Block has been referenced many occasions. If not, the picture underneath ought to act naturally informative.
It doesn’t generally make a difference if individuals consider Bitcoin as a store of significant worth contending with gold and land, a mechanism of trade for uncensored exchanges, or a potential unit of record because of its non-inflationary model. As the computerized money supporters state, “honeybadger couldn’t care less” and they’re directly in that sense. No doubt there will never be an accord on what Bitcoin’s fundamental use is and some would contend that there is no requirement for one.
Bitcoin was intended to chip away at an independent premise, without the need of banks, governments, worldwide monetary forms or whatever framework is required for customary fiat cash. Satellite and work arrange correspondence frameworks are as of now being used so as to keep the Bitcoin blockchain alive in any event, during a web blackout. One doesn’t have to envision a disastrous situation so as to scrutinize Bitcoin use as individuals from North Korea and Iran are now utilizing it to sidestep worldwide assents.
How is Bitcoin a store-of-significant worth after a week ago’s 45% drop?
There are numerous who contend that Bitcoin can’t be a store-of-significant worth dependent on its whipsaw unpredictability however important knowledge can be drawn from gold’s value activity during the 2008 money related emergency.
Gold certainly doesn’t look like a safe haven after a 24% plunge in less than 2 months, even more worrisome is the fact that the S&P 500 remained flat during that period. Therefore, is it really fair to analyze any correlation over such a short period? Does that sharp movement in price invalidate gold’s resilience during market uncertainties?
The same thing can be said as Bitcoin enters its first-ever major global crisis. This, in fact, is the first of four triggers for a major price pump ahead; this is where we will focus.
Resilience and lack of correlation
Bitcoin price sustaining a level above $5,000 translates into a 55% or more premium to the December 2018 low of $3,200. Keep in mind the current crisis is something without precedent over the past decades.
The S&P 500 took only 3 weeks to drop 20% from its peak, a point which most investors consider the beginning of a bear market. This is unprecedented in history even compared to the 1929 stock market crash.
Bitcoin’s lack of correlation with stock markets is another factor that might aid a new wave of inflow as investors realize the crisis has impacted almost every asset class imaginable. The chart above represents the price relation between the S&P 500 and Bitcoin on a scale from -1, a perfect inverse relation to +1, a perfect relation. The indicator clearly trends to 0 most of the time indicating there is absolutely no relationship between the two assets.
2020 Bitcoin halving
The equivalent inflation being reduced to 1.8% per year after the block subsidy cut does not directly translate into price appreciation. What investors should be looking for is the sustainability of the network despite the halving’s negative impact on every single miner. It is a $5 billion industry and yet there’s nothing they can do in order to prevent it.
Those forks were willing to increase block capacity, hence increasing the difficulty for an average user to run a node. The simple fact of the network continuous operation and adherence to the social consensus will be itself a display of strength.
Will Bitcoin survive the current financial crisis?
Even though the current crisis does not seem to be mortgage credit-related, the economic turmoil caused by the Coronavirus might be enough to bring down highly leveraged companies, physical retail oriented businesses and credit lenders. This GDP setback could be the trigger needed to remove confidence in the financial system as a whole.
No one expects Bitcoin and cryptocurrencies to be the first option for most investors but it surely is a contender for a small percentage, as evidenced by a Charles Schwab report published in November 2019. Recent examples of Venezuela, Turkey and Iran struggling to deal with hyperinflation of their local currencies shows that the financial crisis could lead to a perfect runaway for increased Bitcoin adoption.
Since its inception Bitcoin has been patiently waiting for a global crisis. The recent price crash does not reflect investors’ lack of confidence in Bitcoin’s network strength, digital scarcity or its ability to work as a medium of exchange.
The potential triggers for an upcoming rally come not only from its decentralized and noninflationary nature but also from the potential crisis impact on financial institutions and the government’s ability to sustain fiat money credibility.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.