Can Bitcoin (BTC) be explained in terms of current economic and financial theories? The evolution of the price of BTC seems to emerge from the theoretical or empirical models used until then to predict the price of traditional assets. Bitcoin is seen as digital gold, as a hedge asset against the devaluation of the fiats. However, its price is not affected by the effects of exogenous factors tending to favor risky assets and penalize hedging assets such as gold.
Bitcoin against anti-covid vaccines
The price of BTC Outperforming gold as investors expect the global economy to recover with the announcement of promising covid-19 vaccines.
Bitcoin broke the 17,000 USD mark on November 17, 2020, registering growth of around 22% in November 2020. The price of an ounce of gold gained only 0.5%, trading around $ 1,890 on the same day.
The price of BTC had registered a drop of about 6% when Pfizer had announced the progress of tests for its anti-covid vaccine which would be 90% effective.
A few days later, Bitcoin did not tremble when Moderna said he had a more effective vaccine against the coronavirus.
Risk asset or hedge: the dual status of BTC?
For the Head of Commodity Strategy within the Saxo Bank, Ole Hansen, the prospects for the global economy to return to normal from the second half of 2021 would benefit risk assets to the detriment of plan assets.
Although the BTC is considered a hedging asset against the inflation of fiats and in particular the dollar, forecasts of an imminent return to normalcy of the economy do not seem to have had any negative effects on its price.
The BTC even tackled the last resistance – before a new ATH – at the level of 18,500 USD, on November 18, 2020.
The price of Bitcoin seems to be protected on the one hand by institutional investors with a long-term outlook who buy the lows following a correction or an exogenous factor shaking the markets and, on the other hand by a euphoric feeling accompanying the current bullish rally and attracting new buyers in the markets BTC.
What exogenous factors could put a stop to the structural rise in the price of BTC? Laws prohibiting its trading, its mining, in the United States, Canada, China, South Korea? The launch of the digital dollar, the digital euro or even the crypto-yuan? BTC’s decentralized and deflationary characters seem to shield it from off-chain jolts. Bitcoin has shown its strength during this pandemic, it should have no trouble adjusting in a post-covid world.
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