There is an opinion that the crisis of 2020 will be the very Mega-crisis that happens once every 100 years. The fears will be justified or not, only that remains to be seen. However, we decided to present three scenarios for Bitcoin in the case of a crisis.
There are three scenarios for Bitcoin in light of the financial crisis of 2020 in this article. The optimistic means the return of cryptocurrencies to the status of defensive assets. In the case of the neutral scenario, Bitcoin will behave by analogy with risky assets. And pessimistic one will lead to the complete disappearance of Bitcoin.
Bitcoin can become a defensive asset by analogy with gold, which at first became cheaper at the beginning of the 2008 crisis because everyone tried to cash out. A large amount of money had already appeared on the market, however, there was still no confidence in the growth of the economy. People began to invest in gold, after which it set the maximum price and received the official status of a defensive asset.
Let’s discuss whether Bitcoin can do the same? CoinMetrics research shows that BTC were most sold from wallets created 30, 90 and 180 days ago during the sale on March 12. But those who hold digital gold for a year or more, rather calmly reacted to what is happening.
The obvious conclusion is that the scammers are still strong, they have not lost faith in the asset and are ready to keep it further. Also, you can recall the charts on stock indices and oil – only Bitcoin up to $ 3,800 recorded a 50% repayment after a global collapse. Buyers are still here, they are in the market and they are ready to invest further.
And as the Bitcoin supporter Whale Panda, correctly observed, when the Bolivar devalued in Venezuela, the population bought up US dollars:
I actually never seriously thought that we could see hyperinflation in the US and Europe.
After these last 2 weeks I've changed my mind on this.
What's interesting is when you saw this happen in countries like Venezuela they fled to USD. Where will people with USD flee to?
— WhalePanda (@WhalePanda) March 16, 2020
But what will happen when the US dollar starts dropping in the USA? What currency should people carry their money? However, the Federal Reserve has launched printing presses to the maximum, they are releasing tons of new money and this will certainly lead to inflation.
Therefore, we are ready to believe in the possibility of a golden scenario for Bitcoin, when the cryptocurrency begins to recover with gold after the end of the most terrible phase of the crisis.
Bitcoin was launched on January 3, 2009, as a response to the arbitrariness of the banking system. The stock market has felt its bottom after the 2008 crisis for two months. An uptrend lasted 11 years and ended on February 20, 2020.
This is very important because the higher the S&P 500 quotes, the stronger the people’s faith in the possibility of perpetual growth. At the same time, the stocks that are getting more expensive every day will lead the hour of reckoning sooner or later. Investors saw how risky assets are.
Well, the world economy cannot, under the current financial model, show growth indefinitely. It needs to periodically dump excess, piercing the investment bubble and arranging a crisis.
It turns out that from February 2009 to February 2020 the market had a huge amount of money and an unprecedented level of optimism among investors. People saw how risky assets provide more and more profit, and carried money in them. Therefore, as soon as Bitcoin came out of the shadow and became known to a sufficiently large number of people, we saw three price bubbles on it at once. But the asset was constantly coming back to life at the expense of scammers, and the last such peak price was $ 20,000 per BTC.
And although Warren Buffet states, that cryptocurrencies do not produce anything, it is comparable to stocks. It is a risky asset that now is falling naturally along with the stock market, with which Bitcoin has been correlating since 2019.
Therefore, today we are seeing a fall, and it will continue because the stock market is not the bottom. Most experts expect a drawdown of another 20-30% and possibly even more percent on shares, and then Bitcoin will probably repeat the sale on March 12. Quarantine in the USA and Europe will certainly hit the economy, as it was in China. And when they begin to count losses, investors will begin to massively dump securities and cryptocurrencies with them.
It turns out that the neutral scenario for Bitcoin is that we are still looking for a second bottom and the upward trend in the cryptocurrency market will return only after the crisis is over.
Some users believe that Bitcoin is a pyramid and its price will necessarily fall to zero.
But what if the current crisis is “Mega” and we will be able to see a repeat of the Great Depression, which lasted ten years from 1929 to 1939?
The reasons for such events can be different and quite realistic. The first thing that comes to mind is the quarantine of developing countries due to the collapse of oil prices, and anything can be there.
As a result, the crisis will drag on for three, five or more years. Everything except buckwheat and toilet paper will collapse and devalue. In this case, Bitcoin will not disappear completely, because the current infrastructure and scope of adoption are quite large. But it may well collapse to $ 1000 and below, for example, to $ 100 mark.
It will be like a time machine, which all cryptocurrency enthusiasts dream of, to return in 2010 and purchase with all the money. But altcoin holders will not be envied in this case, the dream of Ton Vays and the rest of the Bitcoin maximalists will become true. In this case, every altcoin will fall to zero and history will forever forget their names. And we do not exclude that this will affect absolutely all altcoins, that is, even Ethereum, Litecoin, and XRP.
Three voiced scenarios are our personal point of view, and time will tell how the situation will actually happen.