Bitcoin as safe haven during coronavirus

Investors Find Safe Haven in Bitcoin as Coronavirus Spreads

The deadly disease that originated from a small province in China has spread far and wide affecting the entire world by storm. Moreover, financial markets and stock markets have been impacted the worse. Markets have suffered the worst downfall since the last financial crisis of 2008. Over $5 trillion dollars from the economy have been wiped off causing global financial havoc. 

 

With stock markets tumbling and falling indexes like S & P 500, institutional investors seem to have found their safe haven in bitcoin. However, while the traditional financial instruments seem to be taking a hit, one asset seems to be gaining rapid momentum. Case in Point: Bitcoin. 


Investors Turning Towards Bitcoin?

2020 seems to be a year for bitcoin and crypto markets. The price of one bitcoin rose from $7000 at the beginning of the year to as high as $10,000. Other prominent cryptocurrencies including ethereum have also gained momentum in these 3 months. 

 

Moreover, it is surprising that while the entire global market has been affected due to the impending disease, bitcoin has still managed to remain unscathed considering its volatile history. Are institutional investors investing in bitcoin due to the fears of the impact of Coronavirus?

Factors Contributing to Bitcoin’s Upward Price Movements

In line with gold, bitcoin might also be looked like a safe haven investment amidst the fear of the virus spreading. But, there are a number of factors that are now contributing to bitcoin’s price rally. 

 

The first of which is the bitcoin halving event that is set in May 2020. As the past historical halving events suggest, the price of bitcoin might be getting a boost as the rewards cut to half. 

 

Additionally, countries seem to be legalizing or drawing a regulatory framework for cryptocurrency trading and acknowledging bitcoin as a legal tender. India is the latest country to join this list, wherein the Supreme court of India lifted the bank over cryptocurrency trading. 

 

Another major factor that plays a significant role in bitcoin’s movements is the addition of regulatory institutions like Bakkt. With the offering of bitcoin futures, such institutions have paved the way for institutional investors to get their hands on bitcoin. 

 

Furthermore, central banks across the globe have also developed plans for launching Central Backed Cryptocurrency (CBD’s). All such factors show that governments and central banks have now started recognizing the potential for bitcoin and cryptocurrencies as well. 

The Next Wave

After experiencing a major boost of around $10,000, the cryptocurrency is trading in the range of $9000 at present. After a fall of 4% last week, analysts also suggested that like global markets, bitcoin has taken a hit with the spreading of coronavirus. 

 

Although a few economic situations including US-Iran conflict have given a boost to the price of bitcoin, it seems difficult to correlate the fear over coronavirus with the price of bitcoin. A wave of recent positive developments seems to be more likely to play a role in bitcoin’s movements. 

 

What remains to be seen is how the global markets continue to react if the virus continues to spread further. Also, how will that affect the price of bitcoin and other cryptocurrencies?