Bitcoin has largely failed to perform as a so-called safe-haven asset during the coronavirus crisis – but perhaps that has begun to change, wrote Billy Bambrough in an article for Forbes.
The bitcoin price fell sharply last month amid a broader market crash that will go down in history as one of the worst market routs of all time, but outperformed major US indexes for the first quarter.
Now, renowned former Goldman Sachs fund manager Raoul Pal has warned the coronavirus crisis will cause history’s worst insolvency event, while moving 25% of his portfolio to bitcoin.
“I think the balance of probabilities are that this is a much longer event – in terms of economic impacts – than anybody is pricing in,” Pal, who is the chief executive of research outfit Global Macro Investor and founder of business and finance media platform Real Vision, told the Lindzanity podcast.
“I think it’s a huge societal change that’s coming from all of this,” Pal said, adding that he thinks the coronavirus crisis will cause “the largest insolvency event in all history.”
The US unemployment rate could rise to more than 32% over the next three months as more than 47 million Americans lose their jobs, economists at the Federal Reserve warned this week.
Others have echoed this, with one official at the UK’s Bank of England warning unemployment in Britain and the US could surpass levels reached during the 1930s Great Depression within months.
The leisure, travel and tourism sector has been hit first with restaurants and bars closing their doors last month but other industries are in the firing line.
Retail, construction, childcare, and white collar jobs are all expected to be affected, with even dentists and physicians in the healthcare sector reporting difficulties.
Late last month, US President Donald Trump signed a $2 trillion emergency relief package to try to offset the economic devastation wrought by the coronavirus pandemic, marking the biggest rescue deal of its kind in US history.
The extraordinary measures, also enacted by other major governments around the world, have had mixed success, with financial markets struggling to find much comfort in the flood of freshly-minted cash and promised support.
The massive coronavirus-induced crash meant stock markets around the world suffered historic losses in the first three months of the year. The Dow Jones Industrial Average and London’s FTSE 100 recorded their biggest quarterly drops since 1987, plunging 23% and 25% respectively, while the S&P 500 lost 20% during the quarter, its worst since 2008.
Pal, a long-time bitcoin advocate, fears the economic and market turmoil has only just begun and is in the process of repositioning his portfolio to 25% bitcoin, 25% gold, 25% cash, and 25% trading opportunities to try to weather a deeper equity rout.
“The moment the spread hit Iran … and then Italy – that all happened over the span of three or four days – I was like: ‘time to panic before everybody else,’” Pal said, adding he predicted the coronavirus crisis would be the “biggest economic event of all of our lifetimes” back in late February.
Last year, Pal successfully foresaw the Fed’s move to cut interest rates to zero and warned that negative interest rates in the US were on the way.
Reports of an increase in bitcoin demand this week have caused some bitcoin and cryptocurrency investors to recall bitcoin’s epic 2017 rally.
Bitcoin’s 2017 rally, which saw the bitcoin price soar from under $1,000 per bitcoin at the beginning of the year to around $20,000 by December, was largely driven by retail investors and so-called fear of missing out as early adopters became overnight millionaires.
“I haven’t seen this much organic new interest in bitcoin since early 2017 in my non-crypto circles,” said well-known crypto investor Ari Paul, the co-founder and chief investment officer of BlockTower Capital, via Twitter.
Global interest in crypto skyrockets
Considering Bitcoin fell by nearly 50% during a single day in March, it may be easy to assume that interest in the cryptocurrency market is low; this would make sense, for a multi-billion-dollar asset to lose half of its value within a day would normally send consumers running for the hills, Nick Chong wrote in Cryptoslate.
But interestingly, data shows that demand for bitcoin and other cryptocurrencies is truly on the rise.
Data shared by Yassine Elmandjra – a crypto-asset analyst at tech investment fund and research firm ARK Invest – shows that the “relative Google search interest” for the term “bitcoin” is approaching all-time highs (first established at the peak of the 2017-2018 bubble) in “several emerging markets”: Peru, Guatemala, Zambia, Uruguay, Kenya, Nigeria, and Burkina Faso.
What’s interesting is that the strong surge in interest in the leading cryptocurrency has transpired over the past week or two, Elmandjra’s chart indicates, counteracting the sentiment that March’s crash deterred investors.
It appears the growing demand for bitcoin and crypto is translating to the rest of the world, too.
As reported by CryptoSlate previously, Qiao Wang found that Coinbase Pro’s BTC order book shows that there are six times more buy orders than sell orders (-/+ $6,000 on each side). Furthermore, this outlet has detailed a trend of stablecoin issuers minting literally hundreds of millions of dollars worth of cryptocurrency over recent weeks.