It is March 13, 2020. Without going too far, I can already tell you that the day of March 12, 2020 will remain etched in the annals of Bitcoin, and more generally in the cryptocurrency industry. The week had already started badly for Bitcoin. During the weekend of March 8 and 9, 2020, its price dropped from $ 9.1K to $ 7.7K. To the uncertainty created by the spread of the coronavirus around the world was added the start of a real oil crisis at the initiative of Saudi Arabia.
Bitcoin crash autopsy
During the first days of this week, the financial markets also continued to lose huge amounts of value. Most stock markets have lost more than 10%. These losses come on top of what they had already lost since the beginning of February 2020.
As of March 12, 2020, the measures taken by the President of the United States to combat the spread of the coronavirus on American soil have created a veritable panic in the cryptocurrency market.
It must be said that the measures taken by Donald trump are almost unprecedented with the highlight the almost total suspension of all flights from Europe due to arrive in the United States.
At around 11:00 UTC, the price of Bitcoin was still $ 7,300. And then, all of a sudden, in the space of an hour, the price of Bitcoin has lost more than $ 1,500!
On some trading platforms, such as Coinbase, the price of Bitcoin has even dropped to around $ 5,400.
This represents a drop of more than 25% in just one hour. Taking into account the price of Bitcoin on other trading platforms, the drop was between 20 and 25%:
In just one hour, several hundred million dollars have therefore been liquidated on trading platforms.
On the night of March 12-13, 2020, while we were in the late afternoon of March 12 in the United States, Bitcoin has seen red again. While its price had stabilized around $ 5,800, a sharp drop took place again, pushing it just above $ 4,000:
On some trading platforms, the price of Bitcoin even fell below the symbolic bar of $ 4,000.
As I write these lines, Bitcoin price has stabilized around $ 5,000 for the time being. However, the next few days are going to be extremely chaotic.
Looking at the rest of the cryptocurrency market, we see that no cryptocurrency was spared during this purge. Bitcoin has lost 33% of its value in 24 hours, and for some Altcoins, it’s even worse:
Within hours, the market capitalization of the cryptocurrency industry lost more than $ 60 billion. The losses even exceeded $ 80 billion at the worst time of the day.
On this day, financial markets around the world have obviously not been spared as you can imagine. The losses are generally between 8 and 15%.
Even gold, which has been a recognized refuge value for centuries, lost 4% on this dark day.
All this reflects the fear and panic of investors who seek above all to obtain maximum liquidity. So we are indeed witnessing a real liquidity crisis which is only in its infancy.
This is the situation when we are on the day after this terrible purge in the cryptocurrency market, and in all of the financial markets.
And now ?
The big question now is what the future holds. As I always explain, no one can predict the future. Nevertheless, I will give you my feeling.
When a crisis of such magnitude sets in, a large majority of people panic. Fear causes these people to sell whatever they own in liquid markets at all costs in order to get as much cash as possible… including Bitcoin.
So, these people are even ready to sell their assets well below their true value. The important thing is to get cash at all costs.
The financial markets plunge for this reason, and gold too, while the precious metal is unanimously recognized as a safe haven in times of crisis.
All this does not call into question the status of gold. On the other hand, this confirms that no liquid market will be spared in the days and weeks to come.
Many argue that the sharp drop in the price of Bitcoin that we just witnessed yesterday calls into question its safe haven status in times of crisis. Personally, I do not think so.
Like gold, the Bitcoin market is liquid. In fact, investors did not spare it when it came to withdrawing the maximum amount of liquidity in anticipation of the economic crisis which we are likely to witness.
Bitcoin prices hit a low around $ 4K yesterday.
And Bitcoin could fall further to around $ 3.5K or $ 3K, but I don’t think it will go much lower. Most of the people most likely to capitulate have left the market by now. The last ones being released today.
People who stay on the market are the ones who fundamentally believe in Bitcoin and its revolution. These people are Bitcoiners who will support Bitcoin no matter what. Their strategy is simple:
HODL Bitcoin, whatever happens.
It’s also my strategy, and this is why I took advantage of this drop in the price of Bitcoin to exchange fiat currency for additional Bitcoins.
It’s a personal choice that is mine only, but shared by thousands of other Bitcoiners.
In the days and weeks to come, the American Federal Reserve (FED) is probably going to have to lower interest rates again. She already did it on March 3, 2020 by unanimously deciding on an historic drop of 50 basis points.
But that will probably not be enough to get the United States out of this major economic crisis that is emerging.
Donald Trump also calls for the Federal Reserve to follow the path of the European Central Bank by lowering interest rates to zero, or even go as far as negative rates.
The next logical step will be the application of a quantitative easing policy that will inject liquidity to support the system.
Inevitably, such a decision will increase the money supply in circulation, which will further devalue the value of what you have in US dollars.
Politicians and central bankers know that what they are doing devalues what a majority of people have, but they will continue to apply this policy, because it is the solution they have been applying for dozens of times. years.
Europe, which already has negative interest rates of -0.50%, will probably also apply a quantitative easing policy to prevent the current system from completely collapsing.
The management of the economic crisis via this monetary policy of continuous inflation of the circulating money supply will occur at the same time as the Halving of Bitcoin is approaching.
We are now less than 60 days from the third Bitcoin Halving.
Around May 11, 2020, the daily creation of new Bitcoins will be cut in half no matter what. Annual inflation of the available Bitcoin supply will drop below 2% for the first time. It will stand at 1.8% until the next Halving which will take place 210,000 blocks later.
Bitcoin’s monetary creation policy is programmed and predictable.
No human can make the arbitrary decision to change it. I sincerely believe that this model, which makes Bitcoin the rarest thing that man has ever created, will allow the price of Bitcoin to take off once the crisis has really set in.
Bitcoin is currently falling, but it’s mainly because everyone is looking for liquidity.
Gold had fallen in 2008 by more than 20% when the banking and financial crisis had erupted. This did not stop it from playing its role as a safe haven once the crisis had really set in. Its price then increases sharply. For Bitcoin, I see an identical scenario in the months and years to come. With the difference that the offer in Bitcoin will not stop decreasing at the very moment when demand will grow stronger and stronger.
For my part, so I see no reason to panic about this purge in the cryptocurrency market. Despite the crisis, the fundamentals of Bitcoin are the same, and events are even going in the direction of the sharp increase that all Bitcoiners expect for the price of Bitcoin in the 18 months following its May 2020 Halving.
Finally, never forget this quote from Warren Buffett:
“Be afraid when others are greedy and be greedy when others are afraid”
– Warren Buffett
Today, when the fear is extreme in a bitcoin market in crisis, I believe that the time has come for you to be greedy.
A developer by training, I discovered Bitcoin in 2014 but I did not immediately understand the importance it could have for the world of tomorrow. I got into it more deeply from the start of 2017 and since then I haven’t given up on the business.
Passionate about Bitcoin and the new system it is trying to build for the future, I decided to participate in its evangelism at my modest level by writing on Bitcoin, Blockchain and crypto currencies on different supports.
It is with pleasure that I publish some of my texts in French on The Coin Tribune.
I also write a lot about personal development and self-improvement.
Do not hesitate to exchange with me via social networks or in comments on my articles if you have questions about my articles.