The pandemic-related lockdowns and overall uncertainty of the economy has made all investment markets unstable. Starting from stocks and precious metals and extending to cryptocurrencies and even collectibles, this unprecedented event took a toll on us all.
In many ways, experienced crypto investors were curious about Bitcoin’s performance in such market conditions. After all, the cryptocurrency was made for exactly that purpose – to help people exit government-backed, highly depreciating currencies. We have seen in the past that people buy Bitcoin to avoid bailout measures aimed towards financial relief in times of such crises.
But COVID19 was, for many, a rather unexpected turn of events. In this article we will take a brief look at BTCs performance over the past few months, and how the market dynamic compare with other financial markets. Ready to delve in? Read on!
Bitcoin’s performance in the early days of COVID-19
Many argue as for the exact date that we started seeing pandemic-related symptoms in the rural areas of China. Some say things started to escalate in December 2019, while others believe it goes as far back as Oktober of the same year. We can’t be certain, so we will simply take a look at Bitcoins performance in the 3-month period leading up to worldwide lockdowns.
As you can see from the graph above, Bitcoin follows a steady uptrend all throughout the end of 2019 and until the end of January. It is at this time that the media catches up with COVID19 and talks about a pandemic start to arise. In early February, the world finds out that China goes in quarantine, and videos of people being violently dragged out of their homes start to emerge. The market starts to turn bearish at that points and, even though we still see the Western world happy about Bitcoin’s YTD progress, people start to sell. Bitcoin quickly drops to the $9000 area and stays there for a while.
The Black Swan crash
The WHO announces that COVID19 is a pandemic on the 11th of March 2020. As soon as the news is out, panic entails. People start selling stocks, precious metals, and even stocks. The only market that explodes in popularity is that of toilet paper.
Bitcoin experiences its first ever “black swan” event and follows the direction of all other investment markets. After a 60% drop to the $4000 levels, The cryptocurrency quickly stabilizes above $5000 and many people that had been waiting on the sidelines choose to opt in – it’s time to buy Bitcoin at a discount.
While many Bitcoin maximalists were somewhat disappointed to see Bitcoin drop in value, the cryptocurrency started its recovery process a lot sooner than other investment markets.
The COVID19 crash caused what more believe as the most volatile period in Bitcoin’s price history. While most were ecstatic over an $11.000 Bitcoin in January, the disbelief at the $4000 level made even the strongest holders think about selling.
However, Bitcoin proved everyone wrong once again and recovered a lot faster than its competing investment markets. Let’s take a look at its performance against gold and stocks.
Shortly after the large pricedrop in March, Bitcoin recovered to its previous price levels within a 2-month period. Even though gold recovered its losses faster than the popular cryptocurrency, Bitcoin’s performance is still the best of all three investment options when looking at its gains in a year-to-date fashion.
The biggest loser in this short crisis was the stock market. The S&P500 is now up 3% on the year-to-date chart, with some expert investors claiming that the only thing that hasn’t crashed it even lower is the extraordinarily large amount ($10+ trillion) of money that the Federal Reserve has allocated as a relief package for the global economy.
While Bitcoin may have followed a downward trend that matches that of other, more traditional, investment markets, during March, it has proved its independence from the same markets when observing its pace of recovery.
Recent price performance in relation to COVID events
What is even more interesting to see is how, in recent days, the global economy and its markets relate to new COVID19 events. The most recent event is, of course, that of President Trump and presidential candidate Joe Biden.
Tonight, @FLOTUS and I tested positive for COVID-19. We will begin our quarantine and recovery process immediately. We will get through this TOGETHER!— Donald J. Trump (@realDonaldTrump) October 2, 2020
This unexpected news has little impact on the price of Bitcoin, as the cryptocurrency remains stable on the $10.500 level, caused mainly by a controversial money laundering story involving Bitmex exchange.
Aside from these news, countries from all over the world are starting to impose lockdowns and flight limitations once again. With new COVID19 cases increasing day by day, the world is once again entering into a period of uncertainty. And yet, even though we could once again experience a worldwide lockdown, Bitcoin has remained above the $10.000 price level for a record number days (68), as of the time of this writing. What we may be seeing is a stronger Bitcoin that has gone through the toughest times, and is now finally ready to reclaim its ATH price.
While many saw the March crash as one of the most stressful periods in their investment lives, others used the opportunity to earn a significant amount of money. And while things may seem to have cleared up, at least for now, we are not out of the woods yet.
The next fe months will be critical for Bitcoin as we will either see it follow its historical price patterns or be interrupted once more by events that are out of anyone’s control. All we can do at this point is wait and see, while being cautiously optimistic of the future.