Briefing: Investors Alert

For Immediate Release

March 11, 2020

Over the past few weeks, we have been analyzing the Bitcoin and crypto-market and monitoring recent events. Many investors believe the halving is a bullish event as Bitcoin gets closer to block 630,000. The Bitcoin halving event is a bullish event from a historical and mining production perspective. However, as we get closer to block 630,000, it is crucial not to dismiss the recent global events.

Over the past few years, institutional investors have been entering the crypto-market, creating a variety of demographic types of investors. Nonetheless, each type of investor has different behaviors and strategies for investing. Since the recent disapproval of the Bitcoin ETF filing, the anticipation and social demand decreased regardless of the upcoming halving. It is important to note that a combination of various recent events surrounding the global economic events, and the COVID-19 breakout is the primary concern. The World Health Organization (WHO) indicated that COVID-19 might be a ‘potential pandemic’ and set a global risk assessment as ‘very high.’ From a global economic perspective, there are two events; the oil price war and the US 10-Year Treasury drops below 1%. The main concern is that these two events are financially added-panic to the current panic surrounding coronavirus.

The oil price war caused prices of oil to drop 30% to 45% in 24 hours. A massive drop in oil prices typically indicates that the current economy is slowing down. Ironically lower oil prices will also boost the economy when markets start to stabilize. However, it is unknown how long it will be until the economy responds positively.

The 10-Year US Treasury Bond dropped below 1%, reaching a low of 0.47%. The US 10-Y bond is considered a low-risk investment for institutional investors. Investors feel that their wealth is safe with government bonds. However, economic cycles are still a factor in any economy which could be triggered by the expected and unexpected. Nonetheless, a sharp drop in the rate well below 1% raises many issues. Comparing the approximate range for the US inflation rate of 2% to 3% as a baseline, it indicates the US 10-Y bond rate dropping below the baseline also means it entered a possible risk zone, leaving investors feeling unsafe to store wealth. The sudden drop is possibly a reaction to the oil price war.

What does this have to do with the crypto-market? Over the years, institutional investors have entered the market; however, these market participants have a specific behaviorial and investment strategy response to such events. Many investors seem to think that Bitcoin is a safe haven when other types of markets suffer. Bitcoin and crypto-assets are less likely to be a safe haven due to priority changes for risk-averse investors. These priority changes are a result of the combination of oil price wars, falling Treasury bond rates, and, most importantly, a global health concern outbreak. The first response is not finding an asset to hedge; it is to sell, exchange, and store into something less risky than oil and treasury bonds, with minimal volatility, and provides utility for the investors’ needs. Such responses triggered at a large-scale in the crypto-market, might enable investors to take advantage of the inefficiencies, which may result in extreme volatility, as we have seen in the past. The recent global economic events may cause a domino effect of panic in many sectors, which will result in global panic, prompting risk-averse investors to makes changes to their investment priorities until these events stabilize. The global panic caused by an infectious virus outbreak will impact retail, government spending, imports/exports, and the people’s health.

Considering all the recent global economic factors and the coronavirus outbreak; therefore, we urge investors to assess the risks of the current crypto-market. Inevitably, we expect that Bitcoin and the crypto-market will experience extreme volatility in the upcoming weeks ahead.

Please invest responsibly.

We want to express our condolences to the families, and loved ones of the coronavirus victims. We also want to thank all the efforts from the doctors, nurses, first responders, researchers, field experts, donors, and government officials for helping the world during this difficult time.

  • CIRCO