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Bitcoin rebounds following recent plunge

By Lawrence Gash

Safe-haven status still up for debate

Bitcoin (BTC) has rebounded in the past 24 hours, surging as much as 21 per cent and temporarily breaking $6,900 on Friday morning.

By mid-afternoon trading the world’s leading crypto stands up more than 5 per cent within a 24-hour window at $6,5450.

BTC fell more than 40 per cent between 11-13 March, plunging as low as $4,150, wiping the gains made in the past 12 months. With the cryptocurrency market recuperating after more than $25bn of the $93bn of value was wiped earlier this month, crypto holders and traders could have weathered the worst of the Covid-19 storm.

Indeed such upward momentum will be greeted by Bitcoin enthusiasts whose faith in the crypto as an alternative store of value has been tested in recent weeks. Since the currency’s inception, debate has raged as to whether Bitcoin could prove to be a digital safe-haven asset.

Sceptics of Bitcoin's potential as a hedge have been emboldened by its recent plunge, while defenders of the viewpoint have pointed to the equally mixed performance of traditional safe-havens such as gold and bonds. Even the Japanese yen (JPY) traded noticeably down on the dollar (USD) on Thursday as investors and institutions rush for cash.

Bitcoin’s sudden plunge could also indicate the crypto’s progress in recent years, becoming a popular asset in many portfolios and funds. With the pressure of margin calls and Bitcoin’s liquid nature it was perhaps unsurprising that the crypto followed gold’s lead.

As many defenders have noted, one will only be able to gauge the success or failure of Bitcoin as a hedge against the extremes of the fiat system in the coming years rather than in a matter of days.

With the return of quantitative easing and slashing of interest rates to record lows throughout much of the West, Bitcoin’s fundamentals could increasingly win through, particularly its finite nature.

Earlier this year the new governor of the Bank of England, Andrew Bailey, warned that bitcoin holders should “be prepared to lose all [their] money.”

With British markets in freefall Bailey has continued to cut interest rates and turned on the money printer to avert further losses.

As there are, and only ever will be, 21 million bitcoin on earth, holders of the crypto can at least be sure that they face less inflationary pressure than holders of sterling (GBP).

FURTHER READING: Bank of England cuts rates to lowest in history and increases bond buying

FURTHER READING: Ex-Bakkt CEO and Georgia Senator engulfed in insider trading storm

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