On Thursday, March 12, trading on the world cryptocurrency market is accompanied by a record price collapse. The Bitcoin exchange rate has fallen by more than 25% and for the first time since May 2019 fell below $ 6,000, but then won back a bit.
Other digital assets show similar dynamics. So, for example, Ethereum fell by 23% (to $ 143), Bitcoin Cash - by 30% (up to $ 179), Litecoin - by 23% (up to $ 36), and ripple - by 17% (up to $ 0.17). The total market capitalization of electronic money decreased by a quarter - to $ 172 billion. Such data are provided by the Coinmarketcap portal.
Interviewed RT analysts associate the observed situation with the aggravation of panic in the global financial market. So, on Thursday trading, the key stock indices of the USA, Europe and Asia showed a significant drop.
As a result of the Asian session on March 12, the indicator of the Shanghai SSE Composite Exchange fell by 1.52%, and the Japanese Nikkei - by 4.41%. At the same time, during trading on European markets, the French CAC 40 index decreased by 12.3%, the English FTSE 100 - by 10.9%, and the German DAX index - by 12.2%.
The collapse of quotes opened and the American stock market. In the first minutes of trading, the Dow Jones industrial index fell 7.2%, the S&P 500 - 7.98%, and the high-tech NASDAQ - 7.03%. As a result of the sharp decline in the indices, securities trading had to be temporarily suspended - the second time in a week. Previously, a similar situation could be observed even during the global financial crisis.
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“The fall in the rate of cryptocurrencies is caused by a general panic on the stock exchanges. Against the backdrop of a massive collapse of exchanges, players began to rebuild their investment strategies and, in particular, sell cryptocurrencies, ”said Bitcoin Foundation member Alexander Kitchenko in an interview with RT.
According to analysts, panic in the global financial market triggered news about the coronavirus. On the eve of the World Health Organization (WHO) announced that the outbreak of a new infection in the world has become a pandemic.
According to recent estimates, the total number of coronavirus infected in the world exceeded 124 thousand, of which more than 4.6 thousand died. Most infected were registered in China (more than 80 thousand people), Italy (more than 12 thousand people), Iran (9 thousand), South Korea (more than 7.9 thousand) and France (2.3 thousand).
At the same time, the price of securities and cryptocurrencies was pressured by a decline in world oil prices. At Thursday's auction, Brent benchmark crude fell 6.8% to $ 33.3 per barrel. Such data are provided by the ICE exchange in London.
Recall, on March 9, at international trading, oil prices fell by more than a third. The collapse of quotations became the largest since 1991. On Tuesday, prices recovered somewhat, but on Wednesday resumed falling.
The reason for the shocking market situation was the unexpected collapse of the OPEC + alliance. On March 6, the parties to the transaction were unable to agree on an additional reduction in oil production and decided to completely abandon all previously taken obligations.
“No one expected such a sharp and severe break in the OPEC + deal. The fall occurred in almost all markets at the same time. The exception is perhaps the price of gold, ”said Vladimir Annikov, adviser to the president of the European Legal Service for Digital Markets of the European Legal Service.
Traditionally, during the growth of uncertainty in the global economy, investors begin to actively buy gold as a reliable means to save money. It is curious that at the beginning of 2020, experts noted similar properties of a protective asset in bitcoin. So, for example, in January, against the backdrop of a military conflict between the United States and Iran, stock markets also showed a fall, and cryptocurrencies rose in price simultaneously with gold.
“Previously, investors viewed electronic assets as an alternative to the modern financial system, but now the situation has changed. As a result of the general panic, cryptocurrencies again acquired the status of risky assets, which should be sold first of all at the moments of market turbulence, ”EXANTE managing partner Alexei Kirienko told RT.
Pending growth
However, RT analysts surveyed do not expect a continued decline in prices for bitcoin and other digital assets. According to Vladimir Annikov, the value of cryptocurrencies may begin to gradually recover in the coming months, following oil prices.
“According to investors, by the end of spring, cryptocurrency quotes should be at a higher level than now. According to the most probable scenario, in the near future the courses can recover by 5-10%, ”the expert noted.
According to Annikov, in the future quotes can demonstrate relatively stable dynamics in the absence of new shocks on the stock exchanges. Moreover, support for the cryptocurrency market may be provided by the launch of new electronic coins - Libra and Gram.
Alexander Kitchenko also allows cryptocurrency prices to rise over the next few months. According to him, investors can again begin to actively buy digital coins as the risks of coronavirus decrease.
“The Chinese authorities have already announced that the peak of the epidemic has passed, so the coronavirus factor will soon cease to exert pressure on cryptocurrencies. As a result, in the medium term, bitcoin may return to the levels of $ 13-14 thousand, ”the analyst explained.
Weak prey
According to Alexei Kiriyenko, until the end of spring, the cost of bitcoin can be supported by the planned changes in the rules for cryptocurrency mining.
Recall that bitcoin exists on the basis of blockchain technology - a single database that contains information about all transactions completed. The issue of new crypto coins occurs due to mining - solving complex mathematical problems and the emergence of a new block in the blockchain network. Each such block is a data array, where information about all operations performed after the creation of the previous block appears. For solving the problem, miners receive a reward in the form of bitcoins.
It is noteworthy that every year the search for such blocks becomes more complicated and requires more and more computing power, and the reward for mining is reduced. So, in 2009 it amounted to 50 bitcoins per block, in 2012 - 25, and in 2016 decreased to 12.5.
According to Kiriyenko, in May, the remuneration of miners will again halve - to 6.25 bitcoins per block. As a result, the supply of bitcoins will decrease, and the demand for electronic coins will increase over time.
“After reducing the reward to miners, the supply of bitcoin will decrease. Accordingly, the price of an electronic coin will also increase. If we draw an analogy with oil, then we are talking about reducing the global “production” of cryptocurrency by almost half, ”Kiriyenko explained.