The Coronavirus crisis continues to wreak havoc on the world economy. Generating record unemployment figures and a deep economic recession in the main nations of the world. For this reason, and in view of the possibility that the economic crisis will continue to deepen until the discovery of a vaccine against the disease. We wonder if the price of Bitcoin will fall once again if the financial markets collapse again.
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The March precedent
Before March of this year, it would have been strange for most crypto users to talk about the possibility of a simultaneous collapse of the crypto market and the traditional financial market. For a long time, it has been normal to talk about crypto currencies like Bitcoin as reserve assets of value. That is, financial assets whose price is not directly related to that of the traditional market.
However, when the main stock markets collapsed with the arrival of COVID-19 to the Western world in mid-March. The price of Bitcoin collapsed along with them. There was a debate within the crypto community as to whether BTC could still be considered an asset of value, or whether it was just another financial asset.
Since then, arguments have arisen from both positions. While those who defend BTC’s status as a safe haven highlight the recovery and significant rise in its price after March. Those who prefer Bitcoin to be seen as a currency rather than an asset of value highlight the correlation between the crypto-currency and the New York Stock Exchange.
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The price of Bitcoin and the COVID-19 crisis
But, more important than this debate from a theoretical point of view are its practical implications. For, when most experts expect additional difficulties for the world economy while continuing to search for a vaccine for COVID-19 The question arises within the crypto world as to whether a new collapse in the financial market will cause the price of Bitcoin to collapse.
The question arises in the Bitcoin Future world as to whether a new collapse in the financial market will cause the price of Bitcoin to collapse. The correlation between the crypt currency and the S&P 500 index has remained high to this day. It’s logical to think that if the stock market collapses again, it will take Bitcoin with it. Especially considering that, unlike traditional financial markets, there’s no such thing as a panic button at Bitcoin. The mechanism designed to stop the day’s trading on the stock market, if its value collapses by a certain amount of percentage points.
In this sense, we have to say that there is indeed a high risk that if the state of the economy continues to worsen we’ll see a new collapse in the price of Bitcoin. Because, at the end of the day, the crypto market doesn’t exist at all, but is an increasingly integrated part of the global economic system.
However, such a collapse is still unlikely at this time, due to the enormous amount of support that governments like the US are providing to their financial markets during the COVID-19 crisis. Therefore, at least in the short term, we can count on some stability in the crypto market.