One of the reasons behind the volatility of Bitcoin (BTC) is that regular prices occur and inconsistencies in its use. Some scholars refer to it as “digital gold”, which is truly a rare and perfect value reserve (SoV). Others view Bitcoin as a kind of software with a technology project or associated network.
The acceptance of El Salvador as a valid tender will probably prove the effectiveness of the Exchange (MoE) that Lightning Network provides. The Layer-2 scaling solution allows instantaneous and extremely inexpensive transfers, although regular on-chain transactions are required to enter or exit this parallel network.
These details about Bitcoin change over time, so BTC has a relationship with traditional historical assets. For example, there is a strong correlation with gold.
The March 2020 crash was devastating for almost every asset class, but the recovery pattern for those six or seven months was virtually identical for gold and bitcoin. Curiously, the opposite movement occurred in 2021, showing an inverse relationship between the two assets.
Is Bitcoin a Tech Stock Proxy?
Bitcoin, on the other hand, began to mimic the Hong Kong stock market, as measured by the Hang Seng Index (HSI). Its top constituents include Tencent, Alibaba and Metuan, the billion-dollar Asian technology company.
This shift in investor outlook – from gold price tracking to tech stocks – raises the question of whether Bitcoin will lose to the downward movement of Hang Seng seen in the last 90 days. Does it make sense to decouple at the moment? If so, will Bitcoin continue to act as a safe haven in a general correction?
On September 14, Evergrand Group, China’s second-largest property developer, announced that a significant drop in sales had forced the company to suspend its overpayment. The single company has more than ০০ 30,000 billion in liabilities, and analysts say it could have a devastating effect on a wider market.
In August, China’s retail sales fell 2.5% year-on-year, compared to investors’ expectations of 7% growth. Clearly, growth and the economy were largely affected in 2020 by the government’s response to the Kovid-1 outbreak outbreak.
However, one must consider that the most influential central banks have been practicing near zero or negative interest rates since the first quarter of 2020. Thus, if the economy fails to gain momentum within a multi-trillion-dollar stimulus package, not much can be done to correct a general stock market and prevent potential losses in the debt market.
The problem is: Bitcoin may be 12 years old, but it has never faced a significant economic crisis, at least not something that puts the $ 250 trillion-plus global debt market at risk. Therefore, any analysis or conjecture would produce a credible assessment impossible.
Bitcoin may be less affected by the market downturn
However, cryptocurrencies have an edge over traditional traditional markets such as commercial real estate, stocks and bonds. Clients will pay off these assets if clients default on their payments, and this increases the pressure because the bank or institution has no interest in keeping them.
On the other hand, in general, Bitcoin and cryptocurrency cannot be used as parallels.
About the billion dollar bitcoin futures liquidation in the derivatives market, they are just synthetic instruments. No events These events will undoubtedly affect the price, but at the end of the day, effective BTC derivatives remain on the exchange. It only goes from long (buyer) balance to short (seller) account.
Until Bitcoin fully enters the financial market and is recognized as collateral and deposit, the medium-term systemic risk for cryptocurrencies is lower than in conventional markets.
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