How the Coronavirus is affecting the Crypto and Blockchain Markets (Exclusive interview)
Crytptocurrency markets and the coronavirus
E-Crypto News in these times of the Coronavirus decided to talk to a few Blockchain executives to take their temperature (no pun intended) to see how the industry is holding up and there plans for the near future.
Steve Ehrlich, CEO and Co-founder of Voyager Digital,
About CEO and Co-founder Steve Ehrlich:
- Over 25 years of experience in capital markets, starting his career at TIR Securities, an institutional brokerage that was sold to E*TRADE Financial.
- Former CEO of E*TRADE Professional Trading, which later became LightSpeed Financial. Under Mr. Ehrlich’s lead, Lightspeed Financial became the third-largest brokerage in the United States and executed an average of 450,000 trades per day by 2009.
- Current CEO and Co-Founder of Voyager Digital; co-Founded with Oscar Salazar, one of the co-founders and first investors in Uber.
About Voyager Digital:
Voyager Digital (Canada) Ltd. is a crypto-asset broker that provides retail and institutional investors with a turnkey solution to trade crypto assets. Voyager offers customers best execution and safe custody on a wide choice of popular crypto-assets. Voyager was founded by established Wall Street and Silicon Valley entrepreneurs who teamed to bring a better, more transparent and cost-efficient alternative for trading crypto-assets to the marketplace. Please visit us at https://www.investvoyager.
The Coronavirus has had a major impact on global markets across the world – from inhibiting trade, to causing panic in the markets. The Fed has just announced a rate cut to help support the stock market, and we saw volatility across both stocks, precious metals, and Bitcoin markets in response.
The crypto market and Bitcoin were due for a healthy correction at the time markets across the globe dropped. We’ve seen both Bitcoin and the crypto market be correlated and uncorrelated to market trends – as it finds its footing in this market. There is a chance Bitcoin may correct further leading up to the halving, but after, we expect Bitcoin to pick up major momentum, as it embarks on a highly-anticipated bull-run in 2020. While the narratives of Bitcoin and whether it’s a true hedge are often as volatile as the market itself, one thing remains the same – the fundamentals of Bitcoin are drastically improving, from Hash Rate hitting an all-time high, to more global merchants utilizing crypto. Keep in mind, Bitcoin was born out of the financial crisis of 2008, and as an asset is uniquely equipped to handle these sorts of economic uncertainties. Whether it’s a cash ban in the U.S. due to the virus, or Global trade challenges, we see Bitcoin and crypto emerging as a white knight in the times of black swan events in the coming years.
David Waslen, CEO Co-Founder of HedgeTrade
There’s been some debate around whether or not Bitcoin is an uncorrelated asset. We saw how cryptocurrencies all experienced a big drop after the DOW’s plunge and many people were quick to judge that Bitcoin is very much correlated to traditional markets.
But we also know that Bitcoin’s value isn’t determined the same way as fiat. Its price is primarily derived from supply and demand, as opposed to using indices, interest rates, and inflationary measures.
Even though both crypto and stock markets fell as the seriousness of Coronavirus’s impact became apparent, Bitcoin took longer to react. The slide it experienced, however, was not out of line with numerous other dips in the last year.
I don’t think anybody expected a huge capital flight from stocks to Bitcoin last week. After all, Bitcoin is still very new to most people and many still consider it too risky. People during crisis events want the liquid asset, which right now is cash, and stable assets (such as gold). Those comfortable with cryptocurrencies might turn to stablecoins as a way to hedge against falling markets.
So while Bitcoin isn’t necessarily correlated to the movements of traditional markets, it definitely correlates to macro events, such as the Coronavirus. Depending on the event, Bitcoin’s price could dip, skyrocket or hold steady. For example, we’ve seen in the case of Venezuela and China that when strict capital controls are put in place to retain control of a national currency, Bitcoin can be an appealing way for individuals to store value. On the other hand, we saw with the recent outbreak that global uncertainty drove Bitcoin’s price down. People sold off possibly to buy supplies or to move to safer assets while preparing for an impending financial crisis.
Another big difference between traditional markets and Bitcoin is the long term view. Right now, in the midst of this crisis, US leadership is calling for negative interest rates, a quick cut in the Fed interest rate, and cash infusions to stimulate stock buying. All three of these fixes devalue the USD in the long term. While they’ve worked in the past short term, they may not be enough to steady the economy in a long term crisis.
Conversely, in crypto markets, we’re seeing rapidly expanding technologies and a massive infrastructure being built for a new kind of sound money. With Bitcoin, for instance, you have a currency that can’t be manipulated, works without banks, and has a fixed supply.
The more this outbreak reveals the cracks in current economic policies, the better Bitcoin looks. On top of that, Caitlin Long of Wyoming just announced she is founding a “Crypto Bank”, which will give institutional investors a way to custody crypto assets. Thus far, we’ve seen growing institutional interest, but no way for brokerages and investment firms to hold crypto assets or have banking services for them. That may all be changing with the Avanti project Long is working on, bringing institutional level demand to Bitcoin, And the advent of being able to buy Bitcoin with Paypal.
Sarah Bauder Senior Investment Analyst at SophisticatedInvestor.com
The repercussions of the COVID-19 outbreak have battered global markets, including crypto markets. With stocks plummeting and the S&P 500 still in the red, crypto like Bitcoin and even safe-havens like gold have seen losses. Although over the past three months, Bitcoin has been up nearly 20%. In addition, some crypto exchanges have seen an increase in trading volume over the same three-month period since COVID-19 first emerged.
Sukhi Jutla, COO MarketOrders Author “Escape the Cubicle: Quit the Job You Hate, Create a Life You Love”
As with all financial assets market volatility can have a strong impact due to the panic and instability created when global epidemics occur. Most financial stock exchanges have been affected as investors are gripped with fear and worry. In most cases, it is fear that drives the markets! So I expect to see continued volatility in crypto-assets and markets as the Coronavirus pandemic continues.
Daniel Polotsky, CEO of CoinFlip
Markets all over the world, whether it is stocks, gold, or crypto are now being examined closely due to the coronavirus. What makes the cryptocurrency market stand out relates to the creation of bitcoin itself. Satoshi created bitcoin because of the 2008 financial crisis in order to withstand future financial crises. Lots of people are comparing this downturn in the traditional financial markets to the one in 2008 and looking to see if bitcoin works. While the price has recently fallen from $10,300 to $8,600, it looks like the price is starting to rise again. Coronavirus stopped many miners in China, where the majority of mining takes place, but it cannot stop bitcoin trading worldwide. Bitcoin trades 24/7 all year long. The fact that bitcoin currently holds the majority of its value proves bitcoin works even in the most speculative of times.
Tim Shaler Economist-In-Residence iTrust Capital
I believe the coronavirus panic will have little marginal buying or selling in the markets for digital currencies. However, the likely economic fallout from dramatically lower oil prices, especially in Iran, Russia and Venezuela might very well cause increased trading activity in the more liquid digital currencies. I believe the run-up in BTC prices from $7000 to $10000 in January was almost entirely a function of the threat of war between the US and Iran and Iranians using any means available to protect their wealth from the prospect of a quickly devaluing currency in the event of war.
Todd Southwick Chief Executive Officer iTrustCapital
We see a significant drop in consumer sentiment when asked if they feel Bitcoin is the best investment in a global pandemic. Does this mean digital assets are a bad investment? My feeling is no. Consumers indicated increased preferences to cash in a mattress and US treasuries, while gold remained the top preference having not moved in any statistically significant way. What this tells me is that:
Consumers are not fearing a 2008 financial collapse as they pick US Treasuries, and cash in a mattress.
Bitcoin and other cryptocurrencies are viewed as volatile high growth investments.
Per Tim’s comments on Iran, Bitcoin and other cryptocurrencies used as a transfer of wealth between countries without ready access to financial markets is important.
Bitcoin was the best investment I made in 2019, having bought in the high 3,000s and sold in the mid 10s. Similarly our clients are executing many sell-transactions followed by buy-transactions, profiting from the volatility of the cryptomarkets. If you are looking at cryptocurrencies as a safe place to store wealth, they are probably not the best option. If you can predict the volatility of the market as it is demanded globally for cross border transactions, you might stand to make substantial money. I believe that over the long term, the ‘halving’ event, and adoption are likely to perform for those that buy and hold.
Bitcoin is not a safe haven.
It’s a high growth asset. Although we see price drops that correlate with our data on sentiment, we don’t feel it’s the main driver of price. Rather it’s the increased adoption of real use outside of an investment vehicle that drives the price increases. Its primary use case is to move wealth in / from countries with capital controls. When we see threats of calamity in countries without ready access to traditional financial systems (Iran, North Korea, Venezuela), prices move up. Prices may drop as investors in cryptocurrencies seek more stable assets to diversify away from high growth -yet volatile investments like bitcoin. Yet, if we are correct that the fundamentals of cryptocurrency come from increased adoption in global payments and cross-border transfers of wealth, the fundamentals for the investment remain.