Will Bitcoin Grow Over Impending Economic Recession? Here’s What Experts Say
Posted on 03-05-2020.
The last few weeks have been tough for the world’s economy. The financial markets plunged over the news of coronavirus spreading outside China, the disruption of well-established logistics chains may lead to inflation, and the consumer good prices may skyrocket. Some of the sentiment seeped into the cryptocurrency market.
ForkLog asked several experts if Bitcoin will be able to act as a protective asset or the price will decline.
Leonid Matveev, Head of Trading Analytics at Waves Platform
I think the majority of professional traders see Bitcoin as a high-risk speculative asset. The top stock indices of the world were just recently storming the historic maximums, which means that players were ready to risk. Part of this speculative capital went into cryptocurrencies to diversify the risks.
Now, we see another picture. The markets are waiting for the coronavirus story to develop. Most of the players went for less risk putting money into cash and the U.S. government securities. Simultaneously, the Bitcoin price went down. I think that the hysteria will end soon and the markets and Bitcoin price will stabilize. Halving will also have a positive effect on the Bitcoin price.
Still, for a short while, there will be some uncertainty in the markets. Stablecoins may be a good solution for the time being.
Alexey Markov, United Traders
Investors in the financial market are confused. There is no way to know what to expect from the coronavirus epidemic when we will get the cure, where the infection will appear next, or when this all will end.
On the other hand, three months since the epidemic started, there is certain tolerance to bad news being formed. The protracted anticipation of the recession may have contributed to the effect as well.
This situation affects protective assets. Bitcoin price went down from the mid-February peak, but it’s still 20% higher compared to the beginning of the year. The current price drop is natural, given that the stock market began getting back up this week. In part, the cryptocurrency market was influenced by the news
about Bitcoin legalization in Germany.
Mansur Guseynov, Independent Crypto-Expert:
Bitcoin acts more like a high-risk asset. It correlates closely with the U.S. stock indices than gold. I believe it has to do with the fact that Bitcoin is included in institutional investors' portfolios. They see crypto as a high-risk asset by default. Initially, when Bitcoin was only bought by private investors, there was no such correlation.
Yet, we can’t say that the decline of crypto-markets is more likely than growth. The U.S. Federal Reserve, the EU Central Bank, and other regulators will do their best to keep the markets from falling.
Alexey Kirienko, Managing Partner of Exante:
Last week, Bitcoin was going down, similarly to the majority of other assets. Although, the reasons behind the downturn in the crypto-market and the stock market are different. In early February, there was a surge of short positions on CME. Then, the upcoming futures expiration date contributed to the declining prices. The rally slowed down over one and a half months.
Meanwhile, the macroeconomic factors are currently in favor of cryptocurrencies. Considering the quarantine measures, it’s hard to find a solution more reliable than crypto, which, unlike banks, is immune to en masse transaction denial. Even between December 2018 and December 2020, Bitcoin had a 100% annual ROI. There is no doubt Bitcoin will grow in the future.
Gregory Klumov, CEO of Stasis.net:
Bitcoin will grow. The growth of the money supply leads to the growing demand for assets of deflationary nature.
In a financial crisis, states are often saving large companies by funding them. Where did the money come from? The central bank monetizes the state’s debts by printing more money and increasing its market supply. The pressure from the money supply inflates the prices for goods. Bitcoin is the asset that benefits from the financial crisis and money printing.
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