Understanding the Coronavirus Bitcoin Market Swings
If you’ve been watching the recent coronavirus Bitcoin market swings, you might feel a bit of apprehension at just how erratic the Bitcoin price chart has been lately. But there’s no need to panic about the recent steep rises and falls on the Bitcoin price chart. Bitcoin has experienced many market swings since its inception over a decade ago. The Bitcoin alarm bells of the past have never actually been any lasting cause for concern.
And there’s further good news too: Bitcoin prices are not correlated with the current value of traditional stock markets for currencies, meaning that the Bitcoin price chart functions independently of other economic factors.
Read on to learn more about why coronavirus Bitcoin price swings are normal, why you should be more concerned about changes to the economy made by the federal government, and why alternative digital currencies are a far safer investment in the midst of a global economic crisis.
Why Coronavirus Bitcoin Market Swings Happen
So why aren’t the coronavirus Bitcoin price jumps anything to be concerned about? It’s first important to understand that the recent spikes and dips in the Bitcoin price chart didn’t just start happening when the coronavirus epidemic began.
Since its creation, the Bitcoin price chart has experienced multiple swings in price. While these periods of “high-highs” followed by “low-lows” might seem alarming on a day-by-day or even month-by-month basis, on the whole Bitcoin prices have steadily climbed upward for over a decade.
It’s also important to realize that panic-buying doesn’t just apply to toilet paper. When people are scared of a pending crisis, trying to minimize personal risk, and desperate for a sense of control, we often see a plethora of articles about cleaned-out grocery store shelves, as we have during the coronavirus pandemic.
But it’s not just grocery stores that reap the consequences of this panic-buying mentality -- financial markets, like the stock markets, do too. It’s natural to expect Bitcoin investors to experience similar feelings of panic and fear that lead to hasty Bitcoin trades.
The good news here too is that, although we are currently deep in this global crisis, no crisis lasts forever. Over time, the panicked buying and selling of Bitcoin will level out, as it always has in the past.
Why Traditional Financial Markets Are More Worrying than the Coronavirus Bitcoin Market
Although you shouldn’t be worried about the coronavirus Bitcoin price chart’s fluctuations, there is more cause for concern when it comes to traditional financial markets.
Governments worldwide, including the U.S. federal government, have over the last few weeks implemented a number of new financial measures related to coronavirus. While these new regulations and acts are intended to help both domestic and global markets, the reality is that they have great potential to wreak havoc both in the U.S. and abroad.
Federal Governments Are Providing Endless Money
In an attempt to help the economic challenges that coronavirus has created, governments across the globe are enacting emergency economic legislation, most of which involves unprecedented increases in spending.
As of mid-April, the total amount of money dedicated to helping stem the financial effects of coronavirus is approximately $8 trillion and counting. The precise financial measures include in many cases immense loans, foregone revenues, equity injections, guarantees, and bailouts for corporations. The U.S., for instance, has pledged to keep buying assets from banks on an as-needed basis for however long it takes, as opposed to setting a deadline or maximum spending amount.
The problem with this mentality is that money simply isn’t infinite. While flooding local and international markets with extra cash might help in the short-term, it will likely in the long run lead to inflation. In other words, traditional currencies will hold less value and costs will increase.
Bitcoin, however, does not have this problem. It is literally impossible to create Bitcoin ad infinitum during financial panics because there is a finite amount, meaning that Bitcoin is resistant to inflation.
As the founder of Bitcoin wrote back in 2009, when it comes to traditional currencies, people have to put a lot of trust into banks and governments to help keep their money safe. When it comes to alternative currencies such as Bitcoin, people don’t have to place trust in anyone but the currency itself.
U.S. Federal Banks Are No Longer Obligated to Have Cash On Hand
The Federal Reserve has taken numerous drastic measures recently in an attempt to help the economy. One of these measures was to slash the reserve requirement ratio for banks to zero.
What exactly does that mean? Essentially, U.S. banks are no longer required to have a certain amount of money on hand for their customers, and they can lend money to people without limits.
The intention behind this measure is to help people in stressful economic situations receive mortgages and loans from banks. Since there are no more reserve requirements, there are also currently no regulations about to whom U.S. banks can loan money.
While this is a noble goal, reducing the reserve rate to zero also means that the money you see in your bank account at any given time is not necessarily the amount of money your bank has available. Your bank might not even have a quarter or a one-hundredth of that amount.
If more and more Americans begin withdrawing their money from banks during this financial panic, banks may end up setting a daily or monthly cap on how much money you can withdraw from your account, regardless of how much money your account is actually supposed to have.
That is exactly what happened during Greece’s economic crisis in 2015, and it wasn’t until three years later that all of the limits on bank withdrawals were eliminated.
With Bitcoin, you always have full control of your money (assuming you have control over your own private key). No government can tell you how much of your money you are entitled to or when you are allowed to have it in hand.
Coronavirus Bitcoin: Your Safest Bet
At first glance, the coronavirus Bitcoin market swings might look intimidating.
However, the recent swings in the Bitcoin market are normal. Bitcoin prices have always gone up and down at a pace that, on a daily or weekly basis, can look worrying. Nevertheless, ever since its inception over a decade ago, Bitcoin prices have steadily climbed upward.
Meanwhile, the swings in traditional markets, such as the U.S. stock markets, are more disconcerting given the total lack of financial restrictions currently placed on both the Federal Reserve and U.S. Banks.
Invest in a currency that no government can pretend to create an infinite amount of during times of economic crises. Invest in a currency that no one can tell you how to withdraw or spend.
To learn more about why Bitcoins are your safest bet right now, or about how Pelicoin’s cryptocurrency ATMs make Bitcoin use safer and easier than ever, check out our FAQs or contact us today at support@pelicoin.com.
Pelicoin does not operate as an advisor in any type of financial capacity. The above is not meant to be used as investment advice.