For years, the cryptocurrency trade has tried to propagate a particular narrative round cryptocurrency, which is that it acts as a “safe-haven” asset, a option to park capital within the face of unpredictable, excessive market occasions, in any other case often known as “black swan” occasions.
The speculation may very well be seen as an argument from ignorance, as a result of it was asserted that crypto was a protected haven primarily as a result of that had not but been confirmed false. With out a black swan occasion, it was simple to assert that cryptocurrencies like Bitcoin would stay secure within the face of extreme market downturns.
In simply the previous couple of months, this has all been turned on its head.
In late 2019, articles got here out a couple of “thriller pneumonia,” together with quotes that “there’s no must panic” and that “it needs to be not severe [sic].” Quickly, the virus unfold, changing into an epidemic in China and now a worldwide pandemic.
Traders have panicked, and maybe rightfully so. The Dow skilled its largest drop because the 2008 recession, and full industries are crashing down. As an example, the S&P 500 Airways Business Index has skilled a extra dramatic decline than even after the 9/11 terrorist assaults.
Black swan occasions and viruses aren’t new — in any case, that is why they’ve names. We have seen them earlier than, from the Spanish flu to SARS to the Nice Recession.
The distinction right here is that COVID-19 often is the most impactful pandemic we have seen in the course of the digital financial system. An increasing number of markets are reliant on the digital financial system, and cryptocurrency is extra deeply intertwined with the digital financial system than anything.
With out a historical past of a pandemic within the digital financial system to look again to, it is anybody’s guess as to how cryptocurrency buyers will proceed to react to the coronavirus. Indisputably, the market hasn’t seen the total impression of COVID-19 but.
Sadly, cryptocurrency markets have reacted equally to conventional markets. Whereas true safe-haven property like gold have remained comparatively regular in worth, Bitcoin is plummeting alongside its conventional market counterparts.
If the safe-haven narrative is damaged, then what is the true narrative? The fact is, Bitcoin and different cryptocurrencies maintain worth exterior of being a protected haven.
For starters, crypto is simply the tip of the iceberg, representing the start of the blockchain trade. Traders could be shocked at Bitcoin’s current efficiency, however understand that Bitcoin doesn’t mirror the trade as an entire.
Different blockchain improvements, akin to tokenized funds and “crypto for good” tasks, march on, no matter Bitcoin’s volatility.
For the blockchain trade, this narrative shift is an efficient factor. The much less of a deal with value, the higher. The actual narrative ought to deal with innovation and all of the enhancements blockchain can carry, quite than the ever-changing value.
That is all of the extra motive to shift our consideration away from value for good. In fact, “innovation” is a imprecise time period, and much more so within the blockchain world, so examples are referred to as for.
We discover examples aplenty from firms to governments to startups. For instance, Forbes lists 50 billion-dollar firms innovating on the blockchain, counting giants from Amazon to Walmart. Governments from Dubai to Estonia have made blockchain a core a part of their digital methods.
Maybe most significantly, on a regular basis individuals are utilizing the blockchain, and that is not altering. Positive, value remains to be essential to concentrate to, and if you are going to make investments, do it proper and diversify, so you do not undergo from the immense volatility of a single asset, like Bitcoin.
Nonetheless, value doesn’t must, and shouldn’t, dominate the blockchain narrative. Sooner or later, I hope blockchain headlines will learn alongside the strains of “You Can Contribute To Clear Vitality With The Blockchain,” and never “Bitcoin value Is Up/Down.”
Now we have a protracted option to go, however I consider cryptocurrency’s standing as a safe-haven asset being examined helps, not hurting.