The adjustment in the price of bitcoin after the coronavirus pandemic broke out was a short-term move arising from a rush to money and does not change the fundamentals of the bitcoin and the crypto market in general, says Transfero CEO Thiago Cesar. Thus, bitcoin’s thesis as an anticyclical asset remains unchanged in the long run, clarifies the executive.
At the height of the market turbulence, all assets fell. The gold, for example, which is considered a millenary safe haven, has also fallen. This proves that the move was much more for hedging than in fact any change in the fundamentals of the cryptomarket”, he reasoned.
He points out that the current decline in markets is related to the measures to contain the coronavirus and are not due to a crisis of confidence in the financial system, as occurred in 2008. In this scenario of confidence crisis is when the anticyclical assets show more their features of safe havens.
Why was there a race for money?
The coronavirus containment measures caused significant losses in global stock exchanges and investment fund positions. As a result, many institutional investors who were positioned in cryptoassets – usually large players such as pension and investment funds – had to liquidate their crypto positions – selling cryptoassets – to compensate others investments that have suffered margin calls – when the investor needs to deposit resources to correct the margin required in their positions.
Injection of funds into the economy could trigger crisis
Although at the moment there is no mistrust in the international financial system, in the long run the scenario changes. The injection of funds into the economy by central banks to provide liquidity to the market, without a systemic crisis that justifies it, reduces the power of action of these institutions in case there is one.
“The investors need to evaluate their investment horizon. If it is short-term, the drop in the value of gold, bitcoin and all assets can scare and the only way out is to have cash. If the horizon is medium, long term, it is very likely that the crisis will worsen and central banks will not respond satisfactorily, and then we can enter a scenario of systemic crisis. In this case, the countercyclical assets will show their value”, analyzes the executive.
It is worth remembering that with the halving event, the trend for the next 18 months is bullish in bitcoin. This should not prevent, in the short term, further fluctuations resulting from financial market movements.