Coronavirus Fear Shakes Up Markets, But Crypto Remains Unaffected

banking dlt

The impact of COVID-19, better known as the coronavirus, has finally started to hit financial markets in a big way, but crypto has remained relatively stable for the normally volatile asset class.

It’s caused the stock market to tank, but safe-haven assets like gold to surge. But what might this mean for Bitcoin and the rest of the crypto market once volatility resumes?

Coronavirus Concerns More Damaging Than Virus Itself

COVID-19, or the coronavirus as its widely known, is having a dramatic effect on the entire globe, from the fear felt by everyday citizens knowing a possible pandemic is on the horizon, to causing financial markets to tumble.

The first signs that the virus could cause markets to crash, was following news that Apple couldn’t keep up with the supply of its flagship iPhone due to closure of production facilities due to the outbreak.

Related Reading | Coronavirus Proved Bitcoin is ‘Flight Asset of Choice’, Says CEO

Apple’s shares corrected by over 10%, causing the largest drop in over six months of growth.

But now that cases of the coronavirus are nearing 80,000 infected, with over 2,450 deaths, and more and more cases popping up outside of China, fears are only growing over the pandemic spiraling out of control.

Fears over the virus spreading and further impacting business operations and the global economy have caused the US stock market to tank.

The Dow Jones dropped by 2.8%, and the NASDAQ fell by 2.9%. Even Tesla, a stock that has gone parabolic in recent weeks, fell another 6.5% amid growing concerns.

Gold, however, the leading flight to safety investors turn to during economic turmoil, has been surging as a result of capital protection.

It takes Bitcoin’s entire crypto market cap to move gold just 3%, so the recent over 7% move suggests that over $350 billion in value entered the gold market over the last two weeks.

Stock Market Tanks, Gold Surges, But What About Bitcoin and the Rest of Crypto?

Bitcoin is often considered the digital counterpart to physical gold, sharing many of the same attributes.

Crypto assets like Bitcoin are often designed to be deflationary and feature limited, fixed supplies, much like the previous metal itself does.

Related Reading | Okay Boomer: Millennials Prefer Bitcoin To Gold During Crisis 

However, unlike the stock markets that have been tanking and gold which has been skyrocketing, the crypto market has remained stagnant over the last week after spending all of 2020 surging thus far.

Bitcoin is up well over 50% year to date and other crypto assets like Ethereum are up more than double in the same timeframe.

Will they follow gold and surge further upward over coronavirus fears? Or will they follow the stock market and collapse as more investors derisk?

There’s a chance that crypto and Bitcoin simply does its own thing. According to data, there’s very little correlation between Bitcoin and other markets.

With the lack of correlation, and such a new, emerging asset class, it is not understood yet how Bitcoin and crypto will ultimately perform in a recession.

They were designed in the wake of a major recession, as a means to avoid them in the future. However, the technology may be too young at this time to serve this purpose.

Only time will tell the truth about what happens to Bitcoin and the rest of the crypto market as coronavirus concerns take hold of the world.

Leave a Reply

Your email address will not be published. Required fields are marked *