How Crypto World Responded to COVID-19 and What’s Next

This March has been, without a doubt, a rollercoaster for the world. However, the crypto market has been slowly getting back to normal after the epic crush.

So what happened?

This phenomenon is often referred to as a “Black Swan Event”. And it’s basically an unexpected circumstance that leads to a significant effect. In this case, we are talking mostly about the global pandemic of COVID-19 and the drop in prices on oil.

Obviously, the world’s economy didn’t react well to the virus. March 16th, 2020, for example, is the second to Black Monday in 1987 in terms of the biggest daily losses and gains over the past 35 years for the S&P 500.

At the same time, simmering differences over how best to manage oil markets emerged at a meeting between OPEC and Russia in Vienna. After Russia’s decision to ditch the alliance, Saudi Arabia decided to fight for a greater market share by slashing the prices by between $4-$7 a barrel. All while planning to lift production to over 10 million barrels a day.

When it comes to cryptocurrencies, many expected them to be the “safe haven”. However, as the market priced in the severity of COVID-19, Bitcoin crashed. This was in part because of investors having a risk-off approach due to global uncertainty.

After that, Bitcoin mirrored the stock market movements, which led to its highest ever 90-day correlation with the S&P 500.

And what’s next?

Simon Peters, analyst, and crypto-asset expert told CoinDesk:

“If the impact of the coronavirus outbreak intensifies beyond the global lockdown we are already experiencing, it could spark a further run for cash”

If it happens, investors may look at Bitcoin as a source of liquidity again, which may lead to another wave of selling. And the tendency over the last few days might indicate that the tide is about to turn.

Holders have started accumulating Bitcoin again, says Glassnode.

Altcoin prices, on the other hand, took on some losses as Bitcoin prices corrected. It was especially notable with Ether (ETH) — 43.06% loss, Bitcoin Cash (BCH) — 42.85%, and XRP which now trades at $0.13, a multi-year low.

It seems like Bitcoin is decoupling from the stock markets as its value returns to the levels of January 1st. On the contrary, the stock markets remain stagnant. However, a steady price recovery in both Bitcoin and the stocks may remain elusive until the coronavirus infection curve stabilizes.