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The Capital

BitMEX Research: 2020 Crisis Will Be Biggest Bitcoin Opportunity

BitMEX Research analysts in their new study evaluated the impact of coronavirus on the economy and financial markets. According to them, the reaction to the virus will mark a significant change in the economic regime — the economic situation will resemble the volatile 1970s and in this environment, Bitcoin can get the greatest opportunity to prove itself.

The stock market crash in 2020 was one of the largest collapses in history, along with:

Global Financial Crisis (2008)

Dotcom bubble (2000)

Asian crisis (1997)

Black Wednesday (1992)

Japan asset bubble (1991)

Black Monday (1987)

Oil crisis (1973)

Wall Street Crash (1929).

On March 17, 2020, the Volatility Index (VIX) peaked at 84.83 (the peak index at 89.53 was reached during the 2008 financial crisis). The S&P 500 index fell more than 30% in 2020 from peak values, and the Dow Jones experienced the largest one-day decline since Black Monday in 1987. At present, there is practically no doubt that the 2020 crisis will go down in history textbooks.

Central banks are often afraid to take actions that may be seen as beneficial to specific individuals, and therefore the outcome of their actions is somewhat uncertain. However, in the new era of fiscal expansion, there will be one clear winner — inflation. There will be not only inflation but also shock. There is no memory of such inflation in our collective memory — inflation has been low and stable for over 30 years. We cannot predict how and when inflation will occur, but at some point, a sudden shock will occur. Not only economic but also cultural shock.

“In our view, the best analogy for where we are headed towards is the 1970s, where inflation was volatile and reached a high of 15%,” researchers write.

Markets are intolerant of change. Not only our politics, economy and culture will be shocked by inflation, but also financial markets, which are very used to the current regime. The transition to a new regime driven by fiscal expansion and volatile inflationary expectations will be very interesting. Volatile times are coming.

In such economic conditions, with high inflationary expectations, gold looks like a very attractive option. But what about Bitcoin? Bitcoin experienced a fall of almost 53% (from peak to a minimum) last week when investors rushed to convert to the US dollar. In many ways, this was inevitable. Bitcoin can manifest itself in the volatile inflationary consequences of a crash reaction.

“In our view, in this changed economic regime, where the economy and financial markets are set loose, with no significant anchor at all, not even inflation targeting, it could be the biggest opportunity Bitcoin has seen, in its short lifetime,” BitMEX concluded.

Author: Marko Vidrih

Featured image credit: Pixabay



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Marko Vidrih

Marko Vidrih

Most writers waste tremendous words to say nothing. I’m not one of them.