Could Now Be the Time to Buy Bitcoin?


This article can be found in full at CryptoVantage

The world’s financial markets are currently in turmoil but Bitcoin has surprised many by stabilizing in the last few days. Could it be that now is actually the time to invest in cryptocurrency?

All signs point to a recession the likes of which the world has not seen since the Great Depression that occurred after the roaring twenties. Although the times have changed significantly, and the underlying factors that triggered the Great Depression are nothing like what the world is facing today.

By now, unless you’ve been hiding under a rock, you’re aware that the stock market has fallen (at the time of writing) about 30 percent since the start of 2020. Bitcoin has also fallen about 30 percent since January 2020. It’s time to take a look at how the cryptocurrency markets are responding to the world economic crisis being caused by a near global shutdown of shops, services and businesses of all sizes.

While the investors in the global markets may be panicking due to 30 percent losses from the start of 2020, this is a fairly regular occurrence in the cryptocurrency markets. What the world is calling a recession right now is what cryptocurrency investors experience at least twice a year.

What is Bitcoin Doing?

Today I visited, not because I usually check out CNN for my market news, but because I wanted to see how the world markets are faring with respect to the crisis. Not well! After scrolling through the page, I noticed that they have a Bitcoin widget on their page tracking the price of Bitcoin today.

While other companies, indexes and industries are well into the red zones on one of the worst days on the market in recent history, the price of Bitcoin hovered today, not reflecting any of the market sentiment the rest of the world was experiencing.

While the rest of the world of finance is busy crashing, Bitcoin for one reason or another has decided to remain stable for the more recent downturns. If you’re following Bitcoin, then you know that its reputation as a “safe haven” asset was crushed on March 12, when it fell almost 40 percent in a single day. Up until that point, it did appear that Bitcoin and cryptocurrency in general had resistance to the market forces plaguing the rest of the world.

The leading theory behind the March 12 crypto crash is that the institutional investors currently losing billions on the Dow Jones and other global markets sold their crypto holdings to cover their losses. The current theory for why Bitcoin is not still falling with other world markets is that retail investors have every reason to believe that “hodling” (holding on for dear life) is the right move for their money.

Trillions of Dollars of Stimulus

On March 17, the White House announced a $1-trillion stimulus package to aid in the economic recovery of the United States. This is after the United States slashed interest rates, and injected $1.5 trillion of liquidity into the banking system. The main question on everyone’s mind: Where does this money come from? It might be really nice to have more cash on hand, but what happens in the long run if you inject this much cash into the economy?

The popular thing to do right now is to compare the phenomenon of additional trillions of US dollars to how Bitcoin handles the economic crisis. To Bitcoin, everything is business as usual. No special meetings, no stimulus package, no emergency funds being injected into Bitcoin’s supply. In fact, the rate of new Bitcoin production is actually still set to slow by half in May 2020. So as the rate that more USD is created, the rate at which new Bitcoin comes into circulation is slowing. This has many economists and cryptocurrency experts speculating on what effect this will have on the price of Bitcoin.

Is Now the Time to Buy?

Famed whistleblower Edward Snowden tweeted on March 12 that the drop in crypto prices feels too panicky, and that for the first time in a while, he’s felt like buying Bitcoin. This sentiment seems to be shared by much of the crypto community. The markets have since stabilized at new values, and have not shown any significant correlations with the trend of the world stock markets.

For many crypto investors, March 12 was a treat, and a gift, allowing them to pick up cheaper-than-usual Bitcoin. There are already well-established truths about crypto assets fluctuating directly with what happens to Bitcoin. This is not true for every cryptocurrency, but it is certainly holding true most of the time.

There are two major factors that are driving the idea that now is a good time to buy, one of which is tied to COVID-19.

  1. The Bitcoin Halvening is approaching in May, decreasing the inflation rate on an already low inflation asset.
  2. The United States is injecting trillions of dollars into its economy, inflating the monetary supply and providing cash for citizens and businesses alike.

Contrarian Investing

According to Contrarian Investing Strategies, the best time to buy is when there is blood in the streets. The logic makes sense – buy when the markets are low, sell when they are high. The problem is, how do you tell when the market is done bleeding? Some would say it doesn’t matter, and I tend to agree. If the stock you’re investing in has taken a nosedive out of fear, it is only a matter of time before the stock rises back to your investment and beyond.

A famous example of this is Boeing. If you invested in Boeing shortly after 9/11, you wouldn’t see the bottom of the market until September 2002. However, Boeing would later quadruple in value, proving that a crash in stock price doesn’t wipe out the value of the stock, it just brings down the price.

Buffett and Bitcoin

Although it may be taboo to quote Warren Buffett in a cryptocurrency news article, the phrase is all too relevant in today’s context, and a perfect way to end this article.

“Be fearful when others are greedy, and greedy when others are fearful.”

CryptoVantage is a website that reviews the best crypto exchanges and helps educate and assist you in how to safely purchase crypto with their simple guides.