Crypto Receives Indirect Stimulus
World markets began their tumble in early March. It appeared that bitcoin and other cryptocurrencies were acting as a safe haven. However, the crash that took place in mid march did not spare the cryptocurrency market. Most cryptocurrencies fell between 20% and 40%, with this crash being one of the most rapid declines in price in the history of crypto. The notion of being a safe haven was crushed, as cryptocurrencies were clearly not safe from the perils of the COVID crisis. It does appear that cryptocurrencies have the ability to bounce back as rapidly as they decline.
The cryptocurrencies did not receive a stimulus package like the stock market did. Although many Americans are opting to spend their $1200 stimulus check on cryptocurrency. This says something profound about the confidence that this group of people have in the American Dollar. That is to say, they don’t have much confidence at all. The effect of these people spending their stimulus on crypto is one to think about. The American government has just printed some amount of money, and directly injected it into the value of cryptocurrencies.
New Meaning of Safe Haven
Perhaps the definition of what it means to be a safe haven asset is changing. The previous thought was that a safe haven asset was immune, or at least resistant to what happens to the rest of the market. This title was held previously by gold. It appears that no assets are truly safe from an economic crash. A new definition of safe haven can instead be defined by how quickly an asset recovers from such a collapse. It is defined by resilience. The properties of bitcoin and many other cryptocurrencies suggest that crypto is built for crisis.
The Origins of Bitcoin
An argument can be made that the original purpose of bitcoin is to provide a deflationary currency in times of crisis. Satoshi Nakamoto, the creator of bitcoin stamped the genesis block (the first block) of the bitcoin blockchain with the headline from the times newspaper. The message “Chancellor on brink of second bailout for banks” was inscribed on the genesis block, as a message that cannot be deleted. A reminder of the origins of bitcoin.
In conclusion, we must not forget where bitcoin came from, because it tells us what it is for. It is for providing the people with a place to put their money, in times when the government is printing millions of dollars per day. Cryptocurrency helps us all fight inflation. Crypto is built for crisis.