The financial crisis began to hit the world because of the COVID-19 virus that never subsided. Financial institutions dominated by the stock market also plummeted and this affected Bitcoin in the last two weeks, the price of Bitcoin fell after the WHO set the virus pandemic stats.
Bitcoin cannot prove itself as a safe haven asset. But not only because of shares, there are several factors that make Bitcoin worse with Covid-19. Here is the review.
Cash Is Still the Way to Buy Major Needs
The most prominent reason for the selling action is the basic human need for stable liquid assets known as cash. When the financial situation is risky, people return to more sophisticated modes.
Therefore, they need to cover their essential needs, such as clothing, boards, boards. Investing is not a priority, this is what causes people to flock to sell investment tools including stocks and Bitcoin to add cash.
Then, most of the institutional money, because the crypto community is blessing institutional money and hedge funds that have come to buy Bitcoin lately, it must be remembered that they bought Bitcoin only for investment purposes. It also rushed to withdraw their crypto portfolio along with global market equities.
Bitcoin Prices Continue to Speculate
The cryptocurrency market is still very new in the financial world, and there is no central authority behind it because Bitcoin is decentralized.
As such, fluctuations are a natural way of life for BTC, which also raises concerns among some investors about the value of their assets. This can also cause mass sales in panic.
In addition, the list of trading exchanges with Bitcoin leverage, such as BitMEX and Binance Futures, continues to grow in number to address the increasing demand for speculative traders who want to take advantage of margin trading. As such, Bitcoin has become more than a speculative asset, rather than a true "store of value".
The effect is clear and has been proven last week, BTC prices fell, Futures trading volume skyrocketed, eventually causing record-breaking liquidation.
Such developments can accelerate the decline in prices. Interestingly, when Bitcoin dropped to $ 3,600, BitMEX went offline due to "technical problems." However, community members, including other popular exchanges FTX expressed doubts if there were any technical problems at all.
$ 3 Billion Plus Ponzi Scheme
This reason is actually not related to the corona virus crisis, but because the price of Bitcoin has fallen, this incident is suspected to be one of the causes. PlusToken is a Ponzi scheme, which was abandoned in 2019. It is another classic pyramid scheme, such as Bitconnect.
Ponzi promised his investors, a double-digit monthly return, therefore it was only a matter of time until the fraudulent projects, originating from China and Korea, disappeared with the money. The company's wallet has cryptocurrency worth more than $ 3 billion on the date the project was abandoned. Later that year, and only recently, the blockchain transaction proved that the founders mixed their coins to sell it and cash it.
The latest PlusToken transaction is March 8, 2020, when 13,000 Bitcoins worth $ 105 million were then released on the market. It is still unknown whether the founder of PlusToken has sold all their coins, however, in the end this will be proven.
Hodlers Sells Bitcoin
According to an ongoing investigation of blockchain transactions, many of the recent Bitcoin sales have come from investors who have obtained coins in the past 1-2 years. They cashed out a large portion of their Bitcoin because of panic and fear of being suspected.
HODLers that store Bitcoin for a long time were one of the factors that made Bitcoin go down in 2018 which brought the price of Bitcoin from $ 20,000 to $ 3,200 in less than a year.
Gold Price Behavior
Precious metals are often regarded as the main safe haven assets. Gold touched the price of $ 1,000 per troy ounce. Then, when the recession got worse, instead of continuing the decisive pace, the precious metal actually fell.
Then, on Monday, September 15, 2008, the crisis peaked when the US bank, Lehman Brothers, filed for bankruptcy. In those six months, Gold dropped to $ 775 and was even lower in the following weeks. Only after the recession ended and investors returned to the market, the price of Gold skyrocketed before finally surpassing $ 1,200 in January 2010.
However, none of the above shook the perception of gold as a safe place. This is what distinguishes gold from Bitcoin, when gold still has a good image in the midst of global instability and a pandemic even though the price is also declining, but Bitcoin is not.
The popular cryptocurrency and other cryptos are down and questioned again about its credibility as a safe haven asset as is often heralded and Bitcoin has not reached its true goal. This should be a peer-to-peer electronic money system, but so far, most of it has been used for speculative investment.
All of this can change quickly if public confidence in the current banking system deteriorates. At present, the breakup of covid-19 is only the beginning to bring up many things including a situation where the bank will continue to print money, which will reduce its value, people finally start looking for alternative payment methods outside the government and banks. That can be a good and profitable step for Bitcoin.
However, this situation is far from reality and there is no guarantee that Bitcoin will continue to fall or will experience a significant increase, while this pandemic continues.
That was some of the reasons that made Bitcoin fall because of the corona virus, in addition to the pandemic, many other assets had collapsed and turned out to affect Bitcoin. In the midst of current conditions, it's good if you remain careful to invest in Bitcoin or others.
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