- The crypto market is currently showing signs of recovery; on the weekly chart, Bitcoin, Cardano, DASH and Zcash are posting significant double-digit gains.
- Possible reasons for the recovery range from Bitcoin’s decoupling from the stock market, to a looming global economic crisis and the printing of 700 million new Tether (USDT).
Following the historic collapse of the Bitcoin and crypto market the week before the previous week, the past week was at least somewhat conciliatory for many investors. Although the large losses could not be made up for by far, Bitcoin and others showed momentum. In contrast to the global stock market, the decline on the cryptocurrency market did not continue. Instead, Bitcoin managed to decouple from the Dow Jones and other indices, as reported by CNF.
Looking at the past month, the top 50 cryptocurrencies are still writing deep red figures, but at least in the weekly view, the price gains provide some hope. Over the past seven days, the Bitcoin price has rallied by around 21%, Ethereum by 10% and XRP by 8%. Among the top 30 cryptocurrencies, Bitcoin Cash (+35 %), Bitcoin SV (+52 %), OKB (+39 %), Cardano (+15 %), TRON (+18 %), DASH (+57 %) and Zcash (+37 %) are among the biggest winners.
Faith in Bitcoin is returning
A very important point for the recovery of the crypto market is certainly the decoupling from the stock market and the resulting return of faith in Bitcoin as a hedge in times of crisis. As Coinbase states in a recent blog post with reference to a November 2007 edition of “The Economist”, “uncorrelated” assets are rare and in high demand during financial crises:
INSTITUTIONAL investors have been looking for ‘uncorrelated’ assets ever since the equity bear market of 2000–2002. They realised that they made too big a bet on the stockmarket and wanted to diversify. But neither government bonds nor cash offered the level of returns they desired.
This week’s decoupling from the stock market may have reinforced the narrative of Bitcoin as an “uncorrelated” asset and thus revived the confidence of investors. As Coinbase revealed, Bitcoin’s correlation with the S&P 500 has historically been highly volatile and largely uncorrelated with major stock market indices. The crash caused by the coronavirus might therefore have been only a temporary phenomenon, according to Coinbase:
If Bitcoin’s historical chart is a reliable indication, recent bouts of positive correlation with the S&P 500 are likely temporary.
At the same time, a global financial crisis is seen by many experts as a great opportunity for Bitcoin. While Europe recently printed 821 billion, America 700 billion and China 100 billion US dollars, Bitcoin Halving is imminent in less than two months. Many economists doubt the long-term effectiveness of printing money. According to them, the expansive monetary policy poses the danger that the current financial system will dig its own grave as a result. Bitcoin could profit greatly from this as a disinflationary “hard money” and could emerge as the beneficiary from the crisis, just as Satoshi Nakamoto designed it at the end of 2008 in the context of the global economic crisis.
Other reasons for the recovery of the crypto market
The growing confidence in Bitcoin is also reflected worldwide in the increasing number of search queries for “buy Bitcoin”. While Google Trends’ value was at 58 out of 100 at the beginning of March, it rose to 96 last week, just below the yearly high of June 2019, when Bitcoin rose to USD 13,000.
However, the increased demand is not only reflected in search queries, but also in the fact that over 700 million new Tether (USDT) were printed during the crash. During the crash, the demand for Tether as a hedge against Bitcoin’s liquidity increased significantly. Ultimately, the printing of new USDT may have had a bullish influence on the Bitcoin and crypto market, similar to the money printing by central banks.