As the crisis worsens, Bitcoin will be a safe place once again

The week of March 9 is probably the most volatile period in 2020, regardless of the market. The market soared, the market fell sharply, the long order fell, the short order stopped rising during the day. While investor sentiment in the markets is negative, many people are confused because there is "no place to hide" in terms of assets. Interestingly, the most successful people are those who quickly sell their assets in exchange for USD / hard money and there are now a lot of options for investing capital.


On March 12, Bitcoin dropped from $ 9,200 to 7,700 and then to $ 7,200 and then $ 3,800 before rising and trading between $ 4,800 and $ 5,200. This move has challenged Bitcoin bulls, who expect the upcoming halving will continue to push prices higher. Similarly, many people point out that Bitcoin has failed to act as a hedge during difficult times - something that has long been attributed to Bitcoin's digital gold. However, these investors are completely wrong because the nature of Bitcoin's safe haven continues.

When the price of BTC plummeted from 9,200 to $ 7,700, gold also fell along with stocks and exchange rates. The reason is probably because of the liquidity crisis because someone has sold off assets. After that, all markets increased over the weekend and the Fed pumped liquidity to the short-term markets. This pumping of liquidity has led people to think about collateral.

Repo market (acquisition agreement): Early warning signs

As observed, stock traders tend to ignore the movement of exchange rates. Unfortunately, they are wasting a very strong signal. Specifically, the "meaningful" or "strange" changes in the short-term markets signal a change in basic liquidity needs for market participants. Although the repo market is complex and dynamic, here is a general outline of what they do and how to use them.

A repo is a short-term loan - usually overnight - where one party sells securities to another and agrees to repurchase those securities at a future date at a higher price. Securities act as collateral and the price difference between the initial sale and repurchase is the repo rate - the interest paid on the loan. In contrast, a reverse repo is a buyer and agrees to resell later.

The repo market has 2 important functions for the wider market. First, financial institutions such as hedge funds and brokerage agencies, who often own a lot of securities and have little cash, can borrow from money market funds or mutual funds with lots of cash. .

Hedge funds can use cash to fund day-to-day operations, transactions, and money market funds that earn interest on their cash with little risk. Most of the securities used as collateral are US Treasury bonds.

The second function for the repo market is that the Fed has leverage to implement monetary policy. By buying or selling securities on the repo market, they can pump or withdraw money from the financial system. Since the global financial crisis, the repo market has become an even more important tool for the Fed. Certainly, the 2008 crash happened after strange movements in the repo market, showing a good indicator of future repos.

The fragility of the current financial system

With stocks being sold off in larger transactions and the market becoming more volatile, the Fed pumped liquidity into the short-term market. While some news claims the Fed has spent $ 1.5 trillion in a recent move to reassure the stock market, they are only sensational and are trying to equate last week's actions with TARP (Troubled Asset Relief Program - allows the Fed to buy bad debt from banks 'balance sheets with the aforementioned banks' stocks). This is not a bailout but a move to defuse the bailout market and money is now part of the repo market making it a short-term debt.

As such, the short-term market where very liquid collateral collectors have a crisis of funding implies that market participants have no cash or do not want to exchange mortgages for cash and are necessary. Fed intervention to continue operations. There is no way to see this as positive, because it will cause 'wild' dynamics and unprecedented yields across the entire yield curve. Worse, this is not a new phenomenon. There was a funding crisis in September 2019. It is clear that repo markets are having a hard time without Fed intervention.

With the severe sell-off situation we have seen recently and the sudden changes in the bond market, perhaps some funds have been caught off guard, especially due to the oil futures contracts and the inability to obtain any sponsored by. This subsequently led to the sale of assets in exchange for cash and a variety of sales transactions across markets.

BTC and vWhat about it?

BTC is a better version of gold because it is scarce among other benefits. However, gold has fascinated mankind since its infancy. So while BTC is a better option, gold has a position in the portfolio that isn't quite ready for digital currencies.

Bitcoin has had a bad week, losing most of its profits in 2019 but still positive on the Y / Y basis (although it has rebounded recently). As these are positive points: Bitcoin and traditional safe-haven assets are all being sold off, Bitcoin is currently trading very cheap against the USD and basic analysis, the value proposition remains unchanged. Because of the newer Bitcoin, the more volatile nature, the dynamics in this market will, of course, be more extreme.

Safe haven status remains

People think that Bitcoin has lost its role as a safe asset, but liquidity is in crisis and government intervention is laying the groundwork for accepting Bitcoin as a safe haven asset.

It is not difficult to talk about long-term arguments and other "hopeiums" in the face of this nascent market in the latest sell-off and ignoring the fact that a lot of people have lost a lot of money. So let's take a look at the short-term arguments:

A "primary" analysis will conclude that BTC has gone down, while stocks have declined and therefore, there is no "store of value," nor does it act as a safe haven. But is such an analysis completely correct? Anyone with mediocre programming skills can draw two lines on a chart and show a correlation, but it's really worth nothing.

Gold price in 2008

In addition, consider gold in 2008. Gold prices plummeted at the beginning of the financial crisis, only increasing after * TALF and other relief measures were implemented, the Quantitative Easing (QE) policy was implemented. strengthening, ie central banks buy some predefined government bonds to increase money supply and inject money directly into the economy.

* TALF: Securities lending facility supported by term assets, a program to increase credit capacity and support economic activity by facilitating to consumers and small business release Stock backed by assets. Not like TARP, TALF money comes from the Fed rather than the US Treasury and so the program does need parliamentary approval, but parliamentary action forced the Fed to disclose its lending practices.

In the United States, QE began in November 2008 and ended after about 6 years with 4.5 billion dollars. This is to illustrate that safe haven assets could be sold off during the liquidity crisis, but then investors began to see the need for sound money assets. safety) to protect against currency devaluation.

As for the cryptocurrency market, signs of pullback have been built. Traders often monitor the position of BitMEX leverage to get an indication of where the market is. Whenever the leverage position builds to an extreme, the market tends to (may be forced to) move in the opposite direction and clear the leveraged positions. There have been more than $ 1 billion in long-term use on BitMEX and about $ 700 million of that was wiped out on the sell-off week. Those are painful but necessary losses.

Because Bitcoin is a mined coin with a modelable production cost, it is important for fundamental investors to closely monitor the miner's behavior. Miners often sell coins to the market or build reserves to sell when prices are more favorable. This is called an MRI (storage of miners). Chainalysis offers an attractive chart that compares the number of coin miners hoarded and the deposited amount sent to the exchange. The miner hoarding is an indication that there is expectation of a possible price increase, but a liquidity crisis will 'dump the river' all and historical data shows that profits will be better for miners. no hoarding.

The future will be like?

bitcoin Index fear and greed of BTC | Source:

Losses don't make anyone happy, but when you invest or trade, it's something you should get used to. An excellent investor can still lose 40% of his investment. So, the short-term moves show an opportunity to buy when we saw a big investment last week. Index greed and fear BTC of implied a staggering change from last month before moving from 59 (Greed) to 11 (Fear) to show that fear is now the driving force of the market. And it's almost always better to buy when others are scared.

But be very careful. Until BTC, gold and treasury bonds are separate from the S&P500, which means breaking their recent correlation, they should still be scrutinized when deploying capital.

If you look ahead, everything is going according to plan. There is still some block and time before halving occurs. However, the miners who suffer because this event will make it harder for them to profit because the block reward is split. On Sunday, March 15, the Fed cut its prime interest rate to 0% and announced that it would buy $ 700 billion of bonds and securities to calm the financial markets and create stimulus. After the recent pullback of stocks, many of us expect the Fed to participate in the new QE form. If so, this could be the first of many property buying programs.

Money printers are about to be commissioned and when started, fixed-supply assets like BTC and gold will work well. The stock market needs an economic stimulus and has shown in the past year that, if the government does not pump liquidity, it cannot sustain current growth.

Minh Anh

According to Coindesk

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Nguyen Diep

My name is Nguyen Manh Cuong. I was born in a poor village in Ba Vi district, HA NOI province - windy and sunny land. Currently

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