The Coronavirus crisis continues to wreak havoc on the global economy. Generating record unemployment figures and a deep economic recession in the main nations of the world. Therefore, and given the possibility that the economic crisis will continue to deepen until the discovery of a vaccine against the disease. We wonder if the price of Bitcoin will fall once again if the financial markets collapse again.
Before March of this year, it would have been strange for most crypto users to talk about the possibility of a simultaneous collapse of the crypto market and the traditional financial market. Well, for a long time it has been normal to speak of cryptocurrencies such as Bitcoin as assets store of value. That is, financial assets whose price is not directly related to that of the traditional market.
However, when the main stock exchanges collapsed before the arrival of COVID-19 to the western world in mid-March. The price of Bitcoin collapsed alongside them. Raising the debate within the crypto community about whether the BTC could continue to be considered an asset store of value, or if on the contrary it is another financial asset.
Arguments have arisen from both positions since then. Well, while those who defend the quality of refuge of BTC highlight the recovery and significant rise in its price after March. Those who prefer that Bitcoin be seen as a currency rather than an asset store of value, highlight the correlation between the cryptocurrency and the New York Stock Exchange.
The price of Bitcoin and the COVID-19 crisis
But, more important than this debate from a theoretical point of view are its practical implications. Since, when most experts expect additional difficulties for the world economy while a vaccine for COVID-19 continues to be sought. The question arises within the crypto world as to whether a new collapse in the financial market will cause the price of Bitcoin to collapse.
And it is that, if the correlation between the cryptocurrency and the S&P 500 index, until today it has remained at high levels. It is logical to think that if the stock market crashes again, it will take Bitcoin with it. Especially considering that, unlike traditional financial markets, there is no such thing as a panic button in Bitcoin. The mechanism designed to stop the day of trading on the stock market, if its value plummets a certain number of percentage points.
In this sense, we must affirm that there is indeed a high risk that if the state of the economy continues to worsen we will see a new collapse in the price of Bitcoin. Since, at the end of the day, the crypto market does not exist in nothing, but is an increasingly integrated part of the world economic system.
However, a collapse of this type is still unlikely at this time, due to the enormous amount of support that governments such as the United States are providing to their financial markets during the COVID-19 crisis. Therefore, at least in the short term, we can count on a certain stability in the crypto market.