2020-5-4 04:00 |
One of the longest standing narratives is that Bitcoin is a “safe haven asset” or “store of value,” an asset that should outperform equities and bonds when there is a recession, geopolitical tension, or otherwise abnormal events taking place that would not be defined as “good.” Although the narrative has come under fire as of late due to weakness in the cryptocurrency market, BTC recently made an astonishing technical feat that some are taking as a sign it is a store of value. Bitcoin Actually Increased During “Catastrophic Economic Event” The past few months have been harrowing for the global economy, to say the least. Due to the outbreak of COVID-19 around the world, governments have been incentivized to shut down industry and force citizens to stay at home, resulting in a global recession expected to be the worst since the Great Depression. Bitcoin and the broader crypto industry haven’t been spared in this economy, with the cryptocurrencies plummeting 50% within a single day in March and industry companies laying off staff en-masse. Yet, just weeks after the initial panic has passed, Bitcoin is actually up against the dollar, outperforming many other assets over the same time period. As observed by Travis Kling — CIO of crypto hedge fund Ikigai and a former Point 72 portfolio manager — the cryptocurrency actually posted a positive performance “amid one of the most catastrophic economic events in history”: “The price of Bitcoin increased 0.60% from the end of February to the end of April amidst one of the most catastrophic economic events in history,” he said before adding that the asset is a “store of value.” The price of #Bitcoin increased 0.60% from the end of February to the end of April amidst one of the most catastrophic economic events in history. A store of value. — Travis Kling (@Travis_Kling) May 1, 2020 It’s Set to Outperform What’s crazy is that analysts are coming to the conclusion that the way things are trending for Bitcoin and for the macroeconomic environment, BTC is poised to continue to outperform in the months ahead. To mitigate the effects of the COVID-19 lockdown, central banks and governments have been forced to go into overdrive, implementing increasing dovish monetary and fiscal policies to bail out people and companies. The U.S. Federal Reserve, for instance, has increased its balance sheet by over $2 trillion in the past two months, activating a number of credit facilities to ensure that companies and individuals don’t go under in these trying times. This trend of record-level money printing increases Bitcoin’s chances at rallying higher, analysts say. As best explained by Dan Morehead — a Wall Street trader-turned-head of one of the first crypto funds, Pantera Capital: “As governments increase the quantity of paper money, it takes more pieces of paper money to buy things that have fixed quantities, like stocks and real estate, above where they would settle absent an increase in the amount of money. The corollary is they’ll also inflate the price of other things, like gold, bitcoin, and other cryptocurrencies.” Photo by Sean O. on Unsplash
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