The co-founder of Bitcoin.org, @CobraBitcoin, wrote a tweet a few days ago in which he shared his views about the current financial crisis and the effect that it could have over Bitcoin (BTC) and cryptocurrencies. He stated that the entire crypto market may not work as a Store of Value (SoV) during a stock market collapse.
Could Cryptocurrencies Work as a SoV?
During the last few months, the COVID-19 crisis has affected almost every country around the world. A virus that started to spread in China has pushed millions of individuals into a quarantine of several months. Due to this situation, countries are now facing one of the worst crisis in the last centuries that has also harmed the entire financial system.
While many crypto users and enthusiasts considered that digital assets could be used as a store of value during a financial crisis, several analysts and crypto figures believe that this is not going to happen.
In this case, @CobraBitcoin mentioned that the biggest investment mistake that users can make is to assume that Bitcoin and virtual currencies are a hedge against the traditional financial system. He has also added that those that naively consider that Bitcoin will negate losses from a recession and a stock market collapse are wrong.
Indeed, when the stock markets plummetted in mid-February, cryptocurrencies followed the same trend. Investors were searching for a way to escape from risk-on assets. Both stocks and Bitcoin were affected by this situation.
@CobraBitcoin went on explaining that people can acquire digital assets and Bitcoin when they have extra cash to place in something risky. He stated that this tends to happen during good times when people can afford to “gamble and dream.”
“Nobody’s going to buy BTC when they’ve lost their job, can’t afford their house, and are struggling to get by,” he stated.
People buy Bitcoin when they have extra cash to invest in something risky, and that's during good times, because when times are good you can afford to gamble and dream. Nobody's going to buy BTC when they've lost their job, can't afford their house, and are struggling to get by.
— CO?RA (@CobraBitcoin) April 8, 2020
Furthermore, he stated that if there is a massive financial recession, Bitcoin could fall to $2,000 or even $1,000. This will be the moment when several individuals will be selling their funds just to cover the most essential and personal costs.
This is similar to what BITMEX CEO, Arthur Hayes, mentioned a few days ago. He stated that Bitcoin could see $3,000 in the coming weeks due to financial uncertainty and the current economic crisis.
