Few markets have been spared from the coronavirus-driven downturn, with companies from Tesla Inc (NASDAQ: TSLA) to Carnival Corp. (NASDAQ: CCL) seeing their shares falling dramatically. The latter oversees the Costa, Holland America, and Princess brands, and with cruise ships in the coronavirus crosshairs, analysts are bearish on Carnival’s prospects.
On Monday, Wall Street suffered its worst day in over a decade as panic related to the coronavirus pandemic manifested in plunging stocks and liquidated assets, exposing the fissures in an increasingly unstable, debt-driven financial system. It’s also caused many investors to reflexively dump their bitcoin, exchanging cryptocurrency for cash they either desperately need (to cover shorts) or wish to spend elsewhere, such as scooping up cheap coins once it’s safe to untether.
The Sky Is Falling
Oil is another asset to feel the brunt, suffering its biggest one-day decline in price since the outbreak of the first Gulf War, falling nearly 25%. Russia’s decision not to cut its oil production to ensure price stability, meanwhile, has provoked fears of a protracted oil war. Oil prices remain down more than 40% this year.
The economic domino effect on traditional assets is not difficult to fathom; amidst destabilizing world events, a slowdown is entirely normal: equities plunge, currencies and bonds seesaw, oil prices crash. But the snowballing nature of the COVID19 outbreak, wherein quarantine protocols have brought global supply chains, sporting events and entire workforces to a shuddering halt, is a strange new beast for traders to make sense of.
Bitcoiners Take A Bet On Alternate Markets
You might expect market volatility to cause bitcoin traders to batten down the hatches, but according to Boris Kikinadze, CEO of the crypto-powered casino FortuneJack, the action has increased off the back of bitcoin’s slump and the broader market meltdown. “Downturns like this cause people to direct funds into higher risk ‘investments’ such as gambling. We notice a considerable uptick in new users every time there is hysteria in the markets. During irrational times, online gaming flourishes as a form of escapism.”
Gaming is not the only industry experiencing an upsurge: because consumers are frantically stocking up on items such as face masks, disinfectants, anti-bacterial wipes and hand sanitizers – not to mention canned foods, bottled water, toilet paper and medical supplies – manufacturers in these sectors are enjoying a boom. Grocery delivery firms seem set to capitalize too, as citizens spend more time at home, and entertainment brands like Netflix Inc (NASDAQ: NFLX) will see subscriptions rise while cinemas empty.
Bitcoin As A Safe Haven: The Jury’s Out
The panicked sell-off of bitcoin makes for an interesting case study. After all, crypto evangelists have long proclaimed that bitcoin’s monetary properties make it “sound money” and the ultimate safe haven asset, a sort of digital version of gold. Saifedean Ammous, in his book “The Bitcoin Standard,” captures the evangelists’ perspective: “Until bitcoin’s invention, all forms of money were unlimited in their quantity and thus imperfect in their ability to store value across time. Bitcoin’s immutable monetary supply makes it the best medium to store the value produced from the limited human time, thus making it arguably the best store of value humanity has ever invented.”
Because institutional investors now have exposure to bitcoin, its correlation to other assets has risen. When there’s a cash flow crisis, BTC is going to be liquidated by funds ahead of less liquid assets, which may be one of the reasons why bitcoin has suffered amidst the general corona-driven downturn. With stocks and commodities now trading at a heavy discount compared to their 2019 highs, shrewd bitcoiners have also begun looking more closely at stocks. If Robinhood’s stock-trading app can overcome its gremlins, bitcoin-savvy millennials may be tempted to take a closer look at what the traditional market has to offer.
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