Bitcoin performance over the first quarter of 2020 is showing signs of maturity as the digital asset continues to stake claim as the digital gold. According to a crypto outlook report by Bloomberg Intelligence, Bitcoin is faring relatively well as compared to other asset classes.
Despite enduring a drastic decline due to coronavirus fears related selloff, Bitcoin has managed to recover some ground while the mainstream financial markets continues to struggle. The virtual currency decline was less than a quarter of the S&P 500 decline in 2020 despite it being a much more risky asset by almost 5x. According to the Bloomberg Crypto Outlook, Bitcoin outperformed the mainstream financial assets in almost every other metric. This is such a great accomplishment for an asset that is just a decade old.
Bitcoin also outshone other cryptocurrencies as evidenced by its differentiated response to the Covid19 driven economic crisis. The leading cryptocurrency has appreciated in value in comparison to the other cryptos over the first quarter of 2020. Bitcoin recorded a 40% year-on-year growth at the close of the first quarter. On the contrary, other cryptocurrencies recorded a 13% decline over the same period as depicted by the Bloomberg Galaxy Crypto Index (BGCI).
This year’s market conditions have and continue to serve as a major test for bitcoin and its suitability as a safe haven asset. The ongoing coronavirus-driven global economic crisis continues to wreck havoc across the finance sector prompting governments to adopt some unprecedented monetary policy interventions to stabilize their economies.
Bitcoin has exhibited remarkable resilience in the midst of this turmoil further strengthening its credentials as a sound investment able to withstand adverse market conditions. The Bloomberg report expects Bitcoin to pass the current test and emerge as quasi-currency similar to gold. The report believes that Bitcoin price appreciation after its recent shakeout resembles that of gold post the 2008 financial crisis.
Bitcoin’s correlation to gold has reached its all-time high as the two assets seem to be consolidating and gearing for bull runs that could see them test their record highs. Meanwhile the stock market continue to struggle despite the government’s interventions like quantitative easing. As things stand, bitcoin’s performance is gradually decoupling from equities and joining gold in an upward trajectory.
Bitcoin is also maturing fast and transitioning from a speculative asset to a store of value asset akin to digital gold. Bloomberg expects this transition to accelerate further throughout the year as the growing interest in Bitcoin futures will tame volatility while decoupling from the financial markets will strengthen its relationship to gold.
Image courtesy of Pixabay
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