The price of bitcoin has continued to fall. It is in a continuing fight to hold on to the US$8,300 level, a key technical indicator level since the start of the year.

 

While bitcoin is known as a safe haven asset, in the event of crisis big enough to cause cash flow problems, it is inevitably sold precisely because it is a digital asset. There may be situations where unless they can generate cash, businesses could go bankrupt or people may be unable to lead their daily lives. In these situations, even gold can be sold, as seen in cases at the time of the Lehman Brothers bankruptcy.

 

In Japan, talk of additional monetary easing has emerged. Notably, the Bank of Japan has already pledged that it is ready to supply additional funding to the markets.

 

It is difficult to predict the future course of the markets, given that it is very hard to foresee the impact of the new coronavirus. From a macro perspective, the bitcoin price will likely be pulled in different directions by two opposing forces: the negative impact from the coronavirus and the positive impact from the inflow of easy money into safe-haven assets.

 

The halvening of bitcoin is drawing near. With the strong impacts of the coronavirus and easy money, the bitcoin halvening will likely struggle to have an impact on the markets in the short term.

 

There is no telling when the coronavirus issue will end. If it does end from around the summer, a full-fledged bull market is highly likely to begin thereafter. If that happens, there are high hopes for this depressed market to experience a strong rally along with the inflow of easy money.

 

Until then, investors’ nerves will be put to the test. It remains to be seen whether investors can remain calm enough to stay in the market without heading for the exit.

 

Author: Tetsuyuki Oishi (Tetsu ‘BIGSTONE’ OISHI)