How Long Will the Market Downturn Last?
How Long Will the Market Downturn Last?
When will normality return? How long till global markets recover and bitcoin resumes the bull run it was teasing at before the coronavirus materialized? These are questions that all investors are pondering as the epidemic wreaks havok on gold, oil, stocks and – up until March 19 – on bitcoin itself. BTC is up 20% today, but there is still a long way to go before a full recovery is made. News.Bitcoin.com has asked several analysts when they believe this will occur.
Crypto Market Rallies Amid Corona Chaos
Crypto markets are back in the green on March 19, one week after bitcoin suffered its biggest one-day drop in seven years, tumbling over 50% to $3,700. “Bitcoin is uncorrelated [with traditional markets] over any time period other than 1-2 week “indiscriminate panic to cash” time,” noted Ryan Selkis.
On March 19 at 20:00 EST, BTC was up 14% for the day.
“Full recovery when?” many are asking. It’s hard to say for sure, but a guess can be hazarded. Since the Second World War, global bear markets have tended to last an average of 13 months, although a sustainable comeback in 2020 will depend very much on countering the coronavirus. Some economists suspect that a rebound will occur during the summer, when warming temperatures will potentially weaken the virus, while others think the misery will persist for the remainder of the year.
Saga founder Ido Sadeh Man takes a measured view of where the global markets will go from here. “If you believe that the world as we know it ceases to exist any time soon, we can definitely expect an unprecedented rally in prices of crypto assets that are uncorrelated and independent of any existing financial infrastructures,” he told news.Bitcoin.com. “However, I am quite certain that the world is not about to end, and we can therefore expect people to look for diversification within known financial paradigms. This much is certain: as the world is changing, people are seeking stability above all.” He added:
Governments, through their central banks, are deploying unprecedented means of trying to stabilize and provide security to their citizens. However, these means are extremely dangerous and it remains uncertain whether they will indeed provide security or endanger the system as a whole because they’re taking place in an already-weakened global financial environment.
What Fiat Printing Means for Bitcoin
“Over the past two days, bitcoin and certain other coins have already started diverging from traditional markets,” observes Kronos CEO Jack Tan. “DASH, STEEM, and DATA all up a ton even as Asian and western equities are under sell pressure.” On the matter of quantitative easing, Tan ventures “The price impact from fundamental factors such as QE and negative rates will be seen maybe 6-12 months down the line. Certainly the expected impact on crypto from inflation and negative rates will help in the short term to support prices, but whether these catch on and instill confidence in the market remains to be seen.”
STEEM is up 40% on the news of a hard fork to move the Steemit community away from Justin Sun’s kingdom to a new blockchain.
Jack Tan remains bullish however in the mid to long term, predicting: “I believe bitcoin and a few other currencies will emerge stronger than ever after this stress test. However, it will take at least six months to see the true impact the virus has on global GDP, currencies and crypto. While we wait patiently for more signs of bullish divergence in crypto, I have an optimistic target of 30k on BTC for the end of 2020.” Mati Greenspan, founder of Quantum Economics, also believes that bitcoin could be in “full recovery within the next few months” provided efforts to contain covid-19 are constructive.
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
Given that bitcoin is fundamentally immune to the inflationary policies of the global financial system, it could be poised to capitalize on gross monetary mismanagement by actors such as the Fed, finally demonstrating its “sound money” credentials. Bitcoin advocates have long contended that the currency is a hedge against inflation and profligate financial institutions, rather than a safe haven from recession. Nobody can arbitrarily create more bitcoin and expand the supply.
As noted in the March 18 Marty’s Bent newsletter, bitcoin “is completely bereft of the debt handcuffs linked to the traditional financial system … Consistently producing blocks and enabling peer-to-peer transfers for those who have access to the software … This is the type of environment in which bitcoin was birthed. This is why bitcoin exists.” Castle Island Ventures’ Nic Carter also believes that “as long as people continue to crave a permissionless, globally-available, freely usable, always-on, never impaired alternative monetary system, bitcoin will continue to matter. Now more than ever.”
The volatility across assets is unreal right now – not even “safe havens” are immune
To get a sense of how drastic the vol in the treasury market has been this past week, 30-day annualized rolling vol for 20Y US treasury (TLT) index is higher today than bitcoin was a year ago🤯 https://t.co/kFFgGcJnDW pic.twitter.com/c99cy7QIPn
— Ryan Todd (@_RJTodd) March 19, 2020
How Long Will the Downturn Affect Global Markets?
The current bear market took just 22 days to arrive, but it could take as long as 18 months before corona disruption fully abates, with the next three to four months set to be especially tough. The economic effects of coronavirus continue to reverberate, with global stocks plummeting despite major stimulus packages being announced. With many national governments taking the unprecedented step of writing blank checks to help businesses and workers navigate a coming recession, and the Fed slashing interest rates to near zero, it’s natural to wonder how much pain when the global markets will emerge from the wreckage.
Comments by UK Chancellor Rishi Sunak sum up the prevailing mood. At a news conference on March 17 he remarked, “Never in peacetime have we faced an economic fight like this.” Wildfires ignited by the covid-19 pandemic have scorched every part of the economy, hitting sectors such as aerospace, supply chain, housing and travel particularly hard. On the markets, even safe haven assets like gold and corporate bonds have taken a battering as traders wrestle with rising risk. Liquidity continues to dry up as companies draw down on credit lines.
On Tuesday, the U.S. Treasury announced a $1 trillion support package, with $250 billion provisioned for small businesses and $500 billion for individual aid via direct payments and tax cuts. The Fed also announced that it would bail out debt-burdened corporations by purchasing some of their loans. It’s 2009 all over again, the American Recovery and Reinvestment Act Part II.
The most pervasive thing about QE & bailouts (aka printing money) is that we won’t see their economic impact in years
As global debt intertwines, #Bitcoin becomes the hedge
It’ll also take years until its utility is widely accepted; but that’s something long term hodlers know: pic.twitter.com/w1mZJKHCFG
— Lucas Nuzzi (@LucasNuzzi) March 19, 2020
In the U.K., meanwhile, £350 billion has been earmarked for businesses, while in the EU, a €37 billion Corona Response Investment Initiative was proposed to complement member states’ own fiscal measures. The CRII fund will be made available to healthcare systems, SMEs, labor markets and other beleaguered parties.
Money printer goes
BRRRRrrr r r r r r
Fiat is infinite. #BTC only gets scarcer.
59 days and counting to the next halving.https://t.co/zFrFY8u4bG pic.twitter.com/SlP8Wbd2e9
— Binance (@binance) March 19, 2020
With a vaccine potentially 18 months away, flights grounded, borders closed and virus-suppressing, social distancing/home isolation measures in place, life has started to look very different for us all.