As the world struggles to get back on its feet in the wake of the coronavirus outbreak, a question that comes to one’s mind is, how have Bitcoins performed during this crisis? The truth is Bitcoin appears to have done far better than regular stocks but not better than gold. Investors have attributed its performance to speculative bets. The crypto asset soared since mid-March.
Cryptocurrencies seem to have appealed to Bitcoin investors as they can provide a much higher risk-reward ration compared to other financial assets, according to the Grayscale Managing Director. For those who had been viewing Bitcoins as sophisticated digital gold, the results have not been as expected during this crisis. But it is still too premature to understand the total impact of the COVID-19. While the Bitcoin may not have been able to do what other safe haven assets did it is worth mentioning that returns from Bitcoins over five years is still much more than any other types of asset as Bitcoin prices have gone up about 30-fold during this span of time. The automated bitcoin trading bots also contribute to the rise in bitcoin trade as they help even inexperienced to trade like a pro reducing their manual efforts and time investment. Here is the immediate edge review that has good information about the working style of automated bitcoin trading bots.
One may argue that the Bitcoin cannot be held as a safe haven at this time. Bitcoins have not risen like gold or high-quality bonds. They have outperformed stocks by a good margin and can continue to be important to portfolios. While it may not have risen during the coronavirus crisis, the Bitcoin follows its supply-and-demand drivers; hence, it can help to manage risks. Oil as a commodity has node dived in prices during this crisis. However, at other times, oil has performed exceptionally well. So, when you hold different assets, ranging from Bitcoins to oil, you can diversify your risks.
An important role played by the Bitcoin is to protect against the diminishing value of the USD. It is interesting to see that the USD continues to rise strongly even in the wake of the COVID-19; this in turn helps the Bitcoin. So, the Bitcoin may not have been a safe haven during this pandemic but it is still necessary for diversifying your portfolios. This is why Bitcoins are still of use today. Moreover, it is too early to examine its performance.
Bitcoin is known for being volatile. While volatility has taken the markets over during this crisis, Bitcoin prices have not plummeted. This may be considered a big advantage for speculative traders. According to a Twitter discussion in early May, the head of Ikigai, a crypto hedge fund, in spite of Bitcoin’s volatility is has been able to preserve investor’s wealth. BTC has been able to protect the hodlers from this catastrophe. Ever since February of this year, BTC/USD has provided stable returns smoothening out all roadblocks for hodlers. Bitcoin remains storage of value; interestingly, in the recent past, it has seen far fewer episodes of price swings than the traditional market which included oil and stocks. According to CEO of Pantera Capital, Dan Morehead, the Bitcoin had been born during a financial crisis and it will come of age in this one.