The coronavirus pandemic has resulted in massive turmoil in stock markets across the world, and almost all asset classes have suffered due to the deep selloff over the past few days. The same has been the case with Bitcoin, the world’s biggest cryptocurrency by market cap, and over the past weeks, its price has declined quite dramatically.
The cryptocurrency started off 2020 on a positive note, surging at a promising rate. However, over the past few weeks, it has tanked by 50%.
Hedge Against Recession?
One of the most important things to keep in mind at this point in time is that Bitcoin generally performs well when the stock market is in turmoil. Currently, the stock markets are in complete meltdown owing to the coronavirus pandemic, and so far, that has not actually seen a rise in Bitcoin price.
This has come as a surprise to many, considering the fact that BTC is often seen as a hedge against market turmoil. The reason why traders and investors are not yet sold on Bitcoin, despite the current panic, could be due to the possibility of further stimulus.
That being said, the massive government-backed stimulus could also lead to devaluation of the dollar, and that might bring Bitcoin into the picture as a “store of value.” After all, that is what Bitcoin was created for and, slowly but surely, the conditions could be created that might lead to a rally in the cryptocurrency.
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Last but not least, the coronavirus pandemic could lead to a major reset in which digital and contactless payment systems become the norm all over the world. In such a situation, Bitcoin could prove to be a winner as well. However, investors could be waiting for some time before the cryptocurrency can fulfill its primary use cases—if it ever does.
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Joseph Spezzano received a Masters Degree in computer science from The University of Massachusetts. Joseph has been working as a full-time blockchain programmer for the past 5 years. In his spare time, Joseph enjoys writing for CryptocurrencyInvestments.com and traveling.