The current market sentiment has been one that has shaken all weak hands as everything including stocks, commodities and even the cryptocurrency market has undergone a massive crash over the last few weeks. In the face of a pandemic, none of the assets have been able to perform.
Gold hasn’t been acting as a safe haven as it has taken a 24% dip over the past months and the S&P 500 has dropped 20% from its peak. Throughout the sell-off period, Bitcoin (BTC) also fell from $10,000 on February 24, to $4,800 on March 12. The value fell by $3000 after the New York State Governor Andrew Cuomo released a public statement issuing a medical emergency, proving that no asset class can withstand a recession of this nature.
Centralized markets have a major flaw
However, the pandemic also saw stock markets facing difficulties to operate due to the lockdowns and quarantines across the globe. The New York Stock Exchange is already making plans to close its trading floors and move to electronic trading, while the Chicago Mercantile Exchange (CME) group suspended its Chicago trading floor citing concerns about the outbreak.
If trading floors become too risky and the stock market drops further below, the situation could very easily get out of hand and the market could sustain heavy losses. The Philippine Stock Exchange dipped 24% after just a two-day shutdown. But the scenario here could be getting much worse if the pandemic forces the stock markets to cease operations.
This scenario is where the crypto – market sets itself apart from any other financial market. Thanks to its decentralized nature, the cryptocurrency market is open 24 hours, unlike the centralized markets that open and close at a particular time. This also means that the crypto market is immune to any shutdowns due to the coronavirus outbreak.
Bitcoin has been designed to work on a standalone basis, without the need of banks, governments, international currencies or whatever system is needed for the traditional markets to function. Satellite and mesh network communication systems are being used, and this keeps the Bitcoin blockchain alive even during internet outages.
Bitcoin – the last asset trading
With the growing fear of the outbreak and the various problems faced by the stock exchanges, the cryptocurrency market could soon be the only market standing in case the traditional market needs to be shut down. Only some markets have been holding up amidst this global market rout and according to crypto commentator Dan Hedl:
In such a scenario, Bitcoin would have its full strengths on display, and it would also allow bitcoin to function as a safe haven asset again. While most people think that the cryptocurrency has lost its safe-haven status, they fail to realize that this liquidity crisis and ensuing government intervention is laying the foundation for bitcoin’s adoption as a safe haven asset.
Besides, Bitcoin’s lack of correlation with the stock market could also be another factor that could draw in fresh investments into the market considering the questionable conditions of the rest of the asset classes. It is highly likely that BTC is set for an upcoming rally and its decentralized and noninflationary nature isn’t the only contributing factor. The fact that centralized markets and financial institutions have failed is also a major boost for cryptocurrencies as investors would surely want to stay on the safe side.