The Dow dropped a little over 1,500 points today, meaning that all of the gains that it made during the Trump presidency are gone. This is crazy considering that the Dow Jones Industrial Average was nearly 30,000 points just a month ago. This really speaks to how big of an impact the Coronavirus has had, and will continue to have on the market in the coming months.
Even Gold which is usually considered a safe investment in times of uncertainty has seen its market capitalization shed hundreds of billions of dollars.
But what about cryptocurrency?
I like to keep about 5% of my investment portfolio in speculative assets which has largely gone towards cryptocurrencies. When the news broke that the virus was much more serious than enticipated I began to pay close attention to the crypto market to see how it would respond to the news.
Would it follow the stock market? Would people panic sell? Or would the value of certain crypto-assets, namely Bitcoin, increase due to declining faith in the Federal Reserve and world governments as a whole?
Bitcoin’s price proved yet again to be correlated with the health of the stock market as it saw it’s value cut in half in the last month; the same amount of time it took the Dow to lose over 10,000 points.
However, over the last two days, while the stock market has continued to plummet, the leading cryptocurrencies have seemed to stabilize. Bitcoin has recovered slightly as have Litecoin, Ethereum, and others.
Some coins have even performed exceptionally well since the start of the week. Dash for example saw gains as high as 43% today, peaking at $65. Not a single stock was able to match that kind of return, as Dash was the best performing asset for the day.
However, it’s worth noting that Dash is still well behind where it was a month ago.
Still, we must ask, with Gold losing value and the Stock Market crashing like we’ve never seen, will Cryptocurrency become the go to asset?
More than likely, no.
People don’t tend to take risks with their money during an economic downturn, and historically, Cryptocurrency has always been considered a risky bet. During these challenging times it is highly unlikely that the Market Cap will do anything but decrease.
While it is true that Bitcoin has been the best performing asset in the last decade, up over 5000% in that time, it is much more likely that it will drop to $2,500, than return to $10,000.
If you do have a little money lying around, then by all means, play with the cryptocurrency market. Just make sure to do your due dilligence.
It is highly likely that we will be social distancing for a while so it could be a good way to distract yourself from the stock market; and who knows? Maybe you’ll get lucky. Even in a down market there is always at least one coin that sees massive gains here and there.
This article contains the opinions of the author and should not be taken as financial adivse.