The past few weeks have been tough for the world’s investors. Global stock markets have dropped around 35% from the local top on average, gold (yes, even gold) has plunged back under $1,500, oil has taken a nosedive, the U.S. dollar has begun to decimate all foreign currencies, and Bitcoin, of course, has fallen nearly 50% from the 2020 peak of $10,500.
As it stands, it seems poised to get worse for all markets, not to mention the actual economy. In an interview with CNBC published Wednesday, billionaire Bill Ackman, the CEO of Pershing Square Capital, warned of a “depression-era period” if governments don’t step up with dramatic measures to curb the coronavirus. Also, JP Morgan has released a research note that implies the American economy may see depression-era GDP contractions for the first and second quarters.
But, amid all this chaos, investors are starting to latch onto Bitcoin, despite the asset trading in tandem with the crashing global markets.
Here’s why many see so much faith in something that crashed 50% in a 24-hour period last week.
Why Bitcoin is So Bullish Right Now
Raoul Pal — a former executive at Goldman Sachs and CEO of Real Vision who first bought BTC in 2012 — is more bullish than ever on Bitcoin, explaining that “all trust” in the “entire system” has been lost, leaving a power vacuum that he thinks is going to be filled by a digital economy led by BTC.
I can not express how bullish I am on bitcoin. We are at risk of losing the entire system right now. I know they will find a way to save it but all trust is lost.
Gold guys/girls – you’ll be fine too. It’s just that $BTC has bigger upside, by far but is riskier than gold
— Raoul Pal (@RaoulGMI) March 19, 2020
Pal’s bullish point of view has been echoed by PlanB, a pseudonymous institutional investor that dabbles in Bitcoin on the side. He recently mentioned the following fundamental events, marking them as reasons why the cryptocurrency is poised to absorb the value of all fiat money:
- Leveraged long positions, like those on BitMEX, have been wiped out of the system due to last week’s volatility, meaning the “system is cleared.” Remaining are a majority of leveraged shorts, which usually marks the bottom of moves in Bitcoin.
- The traditional system is not yet clear “because of circuit breakers, bailouts, a non 24/7 market,” which is PlanB suggesting that Bitcoin is in a structurally better spot than, say, the stock market.
- Central banks have printed trillions to keep markets afloat. What’s crazy is that more stimulus is likely coming.
- The Bitcoin block reward halving is arriving in May.
It’s clear that many leading analysts are starting to agree that the board is set for Bitcoin to see explosive growth, but no one is too sure when exactly said growth going to happen.
Stocks Need to Bottom First?
Although there are these strong fundamental catalysts and narratives that could drive Bitcoin higher, there is some short to medium-term risk of equities falling further, which some say will mean Bitcoin will fall too.
Trader Cantering Clark laid out his thoughts on this matter in a recent analysis, explaining that with many industries on the verge of collapse due to this unprecedented macro backdrop, there’s no telling how far the stock market and Bitcoin could fall in the coming weeks:
Bitcoin will be free to put in whatever positive price action it can when the major markets idle. As they say “When the cats away the mice will play” The moment equities s**t the bed again Bitcoin will follow.
He added that there’s an extra risk for the crypto industry, pointing to the fact that many companies within the industry are “relatively new” and may be susceptible to bankruptcy amid a recession.
