June 20, 2020

Why does Bitcoin rise in a crisis?

In the economic downturn due to Corona pandemy and the oil price collapse Bitcoin surprisingly surged in its price and got $10000 in early June. This allowed to get great profit successful traders and buyers who had Bitcoin at half of this price in March. Was it a random single upward trend and what comes next: let us have dealt with the expert’s opinions.

Started from a drop

Normally Bitcoin has no correlation with usual assets, but it was a complete collapse in the price in March. According to the opinion of Nikita Semov (CEO of Crypto Mentors) the reason was the strategy of large traders: under the threat of crisis they go to dollars or gold.

Stable while everything flies

Bloomberg analyst Mike McGlone predicted that two assets would rise in 2020: gold and Bitcoin. Two months earlier Robert Kiyosaki (“Rich Dad, Poor Dad” author) also announced “the death of dollar” and called for buying gold and Bitcoin.

The basis for predicting was monetary policy of states: countries will turn the printing press on because of the upcoming crisis. It will affect inflation and currencies. Meanwhile, the Bitcoin system is working at the epidemy, and miner’s activity is accelerating.

Internal and external drivers

Bitcoin has a life of its own but external events affect it anyway. For example, Bitcoin’s rise at 2th of July is connected with the turmoil in the United States: when protests had become critical and had turned into pogroms, the cryptocurrency rate began rising.

The Bitcoin ecosystem also has its own meaning events. One of them is block reward halving which made “digital gold” more difficult to obtain. And another one is the launching of new powerful miners Antminer S9 from Bitmain/ The result is mining farm’s activity accelerating and upward for Bitcoin price.

Cryptocurrencies allow you to make money even when usual investing is unprofitable. And you also can speculate for their fall as if you deal with usual assets. We’ll talk about it in the next article which will focus on Bitcoin futures.