29. March 2020

Corona virus and Bitcoin: Bitcoin compared to Stock market

[Total: 0   Average: 0/5]

What effects does the corona virus have on Bitcoin? In the last hours on March 19, 2020, the Bitcoin price rose by a staggering 20% ​​in times of the Corona crisis and is at $ 6300 at the time of writing. But be careful, the increase of more than $ 1000 in such a short time could be a fake breakout. So let’s take a look at what is happening and why the Bitcoin price is currently (actually) strongly correlating with stocks.

Bitcoin is not ready yet

As much as we all love Bitcoin and know exactly why we are doing it, we also have to look at the development objectively and not let our emotions guide us. So let’s take a close look at what’s going on and why you should be careful now.

The Corona crisis is currently driving all markets against the wall. The stock markets, for example, have huge record losses in some cases. For example, the DAX has lost almost 40% of its value since the crash began (DAX is a stock index that represents 30 of the largest German companies). That means on average the largest German companies lost 40%. So there are some who have lost even more, such as Daimler with almost 60% loss. Investors flee the markets and prefer to trust cash and assets across the board. Risky assets such as Bitcoin are particularly affected. People’s panic leads them to irrational behavior, which is reflected in the steadily falling share prices.

The DAX has lost a few points again in recent days, despite the emergency package from the ECB. Amazingly, there has been a strong correlation between Bitcoin and the stock market over the past few days. It seemed like everything that was happening on the stock market was delayedly reflected in the Bitcoin price. So it seems that investors are taking the situation on the stock market as a starting point to buy or sell Bitcoin. But the Bitcoin outbreak today contradicts this thesis. Is Bitcoin detaching from the stock market or is it a fake breakout?

DAX vs. Bitcoin

To clarify the correlation, we have created a graphic for you that should illustrate the whole. As an example, we take the DAX index to compare it with the Bitcoin price history. We randomly chose the DAX as a representative for the stock market. We look at the last 5 days.

Bitcoin vs. Stock markets
Source: tradingview.com (own representation)

It’s amazing how similar the prices are, with the DAX seeming to be pointing the way and Bitcoin mimicking it. The only thing that breaks out of the pattern today is today. Does it mean that there is no connection and that the correlation is just “coincidence”? We don’t think so. We think that people make their buying behavior dependent on the stock market. No one can make a valid prediction at this time because people act irrationally. Since Bitcoin is a riskier investment than stocks, it may well be that most of them are guided by it. That would mean that the Bitcoin outbreak, which took place today on March 19, 2020, was disproportionate to the DAX. So should the DAX fall again tomorrow, the Bitcoin price could drop significantly again.

Yes, but what about all the new money? – Bitcoin is the winner!

In fact, a hell of a lot of new money has been printed in the past few hours or days.

  • USA printed $700 Billion Dollar
  • China printed $100 Billion Dollar
  • Italy printed $27 Billion Dollar
  • India printed $13,5 Billion Dollar

All in just a few hours or days. There are many more countries that also have freshly printed money.

Is hyperinflation coming now? Bitcoin will help against this!

Bitcoin is deflationary. That means, unlike in our monetary system, there are fewer and fewer new bitcoins. Every four years there is a halving of the new Bitcoin in circulation. The next “halving” is scheduled for mid-May. So the opposite: While all countries print money like crazy, Bitcoin’s amount is falling.

That’s all correct, but we believe that Bitcoin is not yet ready for people to recognize the problem and instead trust Bitcoin. Rather, it takes more time. We believe in Bitcoin and see it as a huge advantage. However, most other investors don’t see that yet. The time for Bitcoin will come when the Corona crisis is over and everyone realizes how much money is suddenly on the market. Then Bitcoin could benefit and, accompanied by halving, reach another all-time high.

You want to buy Bitcoin?

Tip: If you are signed in to Coinbase, you are also automatically signed in to Coinbase Pro. Coinbase currently offers up to $ 176 in free coins, including Stella, EOS, BAT etc., it is worth taking the coins with Coinbase and making the purchase on Coinbase Pro becuase of the trading fees.

Coinbase* (Fee 1.49% of the transaction amount)

Coinbase Pro* (Taker Fees: 0,05 % up to 0,25 %| Maker Fees: 0,00 % up to 0,15 %)

Binance Jersey* (Fee 0.1% of the transaction amount)

Kraken* (0.16% on purchase and 0.26% on sale)

Leave a Reply

Your email address will not be published. Required fields are marked *

three × one =