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A Breakdown and Commentary of the COVID-19 Pandemic Market Crash

March 19, 2020

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A Breakdown and Commentary of the COVID-19 Pandemic Market Crash

Cryptos, unfortunately, are not immune to the market damage caused by the global COVID-19 pandemic. It has caused many to question the notion that bitcoin is a safe haven asset considering its significant price drop, from 10k in February to now playing around the 5k and 6k mark. With a plummeting market cap for all other cryptocurrencies as well, should this drop change how we think or view crypto or just another bump in the road?

Current Situation

According to FX Street, of all the top crypto assets, DASH has been the best performing, up 7% on Wednesday nearing the $50 dollar mark. Chainlink (LINK) is the worst performing of the top cryptocurrencies having lost 5% on a day-to-day basis.

Since the crash, that time the crypto market, as a whole, has lost around $90 billion.

The DailyHodl suggests sell-off activity has been gearing up in the last 24 hours with a total of 107,209 btc or ~566.9 million at time of writing sent from unknown wallets to crypto exchanges. A CoinDesk article from March 13th detailed the warning signs exhibited by large wallet activity after the previous days sell-off.

CryptoBriefing breaks down on-chain data which suggests that long-term holders are still holding rather than selling. “The figures suggest that a mere 1.5% of Bitcoin traded during the frenzied bloodbath were long-term Bitcoin holders.” Essentially, the sell-off was largely new holders of bitcoin, according to their analysis.

Perspective

We are currently looking in the short term but pulling back, there is a different way of looking at things. For one, when looking at year-to-date returns, “Bitcoin still holds a better return than other risk assets like the S&P 500 or oil, even though each are negative in this period.”

Also, as previously noted, many of those who sold were new
to the market. This, moreover, could be a bubble popping during a crisis revealing
a more accurate price point for the asset.

From a long term perspective, while many governments and central banks further devalue their currencies by printing more of it to combat the pandemic, bitcoin will be free from centralized devaluation – meaning, in my humble opinion, that bitcoin and other cryptos should become go-to safe haven assets in the future but it is currently still too early in adoption in the global scheme of things.

The average person still does not own nor understand the significance of crypto, yet. With education and time, bitcoin will prove to be a safe haven asset as there will be more people adopting the technology not because they think they will become millionaires, but rather because bitcoin is a digital asset that they know cannot be devalued by any one person or group. In 3000k years we may be mining gold from asteroids, but there will still be the same 21 million bitcoins.

Ultimately, what goes down will eventually come up. It might shake our faith a bit but when taking a long term perspective, there is now cheap bitcoin to buy up and as traditional fiat continues to getting printed now, and in future events, a stronger more adopted bitcoin will prove to be a store of value during economic downtimes.