See the wild stock market swings and how they can compare to Bitcoin.
In one way or another, all parts of the world have been affected by the widespread turbulence caused by the coronavirus and, as a result, most stocks have fallen to unprecedented levels. The big crash of March 12 (the so-called Black Thursday), lasts until today, taking savings to millions of losses and continues to hit investors’ pockets. And while markets are renewing, the real recovery still has a long way to go.
In June, the stock market began to show positive signs, signaling the long-awaited resurgence. And while June 8 saw the start of the rally during which the Nasdaq 100 hit a historic high, just four days later it marked a massive closeout, during which many stocks hit the bottom of March.
This unpredictable behavior has led experts to draw a parallel between the stock and cryptocurrency markets. Vitalik Buterin, founder of Ethereum, commented in his tweet:
What we expected: cryptocurrency would normalize and become more like the stock market
What happened: the outside world went crazy and the stock market became more like cryptocurrency
– vitalik.eth (@VitalikButerin) June 12, 2020
“What we expected: the cryptocurrency would normalize and become more like the stock market
What happened: the outside world went crazy and the stock market became more like cryptocurrencies ”
Stocks vs. cryptocurrencies: What is the best investment during a crisis?
While it may seem that the stock market is a “safer” and more reliable way in times of crisis than Bitcoin, it’s not always true. Some large banking institutions have suffered losses of more than 50%, while in smaller companies in the oil sector, the drop in share prices may have been up to 70%. While this may hold promise of good returns after the economy resumes, it can still be a long way for stocks to reach the levels seen in January.
Instead, when it comes to cryptocurrency, the market is not the same (contrary to expectations, Bitcoin fell to a large cumulative low for the year on March 13 – and this happened at a time when it was expected to act as a ‘ safe haven ”), is more dependent on internal system factors – one of which may be the third Bitcoin halving that took place on May 11, 2020. This showed a similar level of fluctuation compared to the stock market now experiment.
If you ask where it is best to invest during a crisis, there is no definitive answer. The stock and cryptocurrency markets are equally opportunistic and their performance is reactive to some external events (and the upcoming US presidential elections may be one of them – at least in the case of the stock market). The cryptocurrency market is mainly subject to its own rules or mechanisms and can fluctuate to a large extent depending on fork events, increased mining activity and, of course, announcements about its legal status.
However, there is always a question of gains and losses. While the price of Bitcoin may unexpectedly drop 61% in just one day, as it did in March (and return to the same level in about a month, as it did in April), the price fluctuations in the stock markets are even more – it takes more time to let go and more time to recover.
Thus, it depends on the individual preferences of investors to be willing to accept a greater degree of risk of uncertainty and, often, of unpredictability, or they would prefer to keep the traditional financial instruments checked.