Introduction
The recent pandemic all across the world has not only resulted in a widespread across but also quarantined lakhs. In the past few weeks, the entire world has faced a major set back in the form of a pandemic.
On 9th March 2020, one of the most severe crashes was found in the stock market which remains incomparable to any recent crash. A drop of about 7.8% has been recorded in this recent crash. It has been considered to be it’s the worst loss on a single day and the loss has been multiplied by several days.
On 12th March the strikingly distinguishable drop was recorded by 10% in the stock market. With the grace of the pandemic, the loss did not stop here, it continued and of the 4th day after 12th March, it was 13%. This 13% is a new record which has never been found every again.
Since the COVID-19 was an international case, the effect was inevitable and the loss was unsurprising. Many of the trading applications have undergone immense loss such as cryptotrader.software.
Digital Gold Exposed to Tail-Risk
Since the pandemic affected the stock markets and all financial markets globally the digital gold has been in the controversy since then. It is considered that only BTC or bitcoin is the monster that can deal will all kinds of financial losses incurred by the economy. Some have challenged the power of bitcoins according to them bitcoin will be drowned if they are exposed to the real asset or physical asset.
Correlation Between Bitcoins and the USA
There has been a study on the correlation between bitcoins and the USA which has been worst affected by COVID-19. The approach that has been used for this study is difference-in-indifference. The potential effect of the pandemic of the USA was very unpredictable hence this is interesting to know.
It was first difficult to measure the performance of the bitcoins with respect to the black swan event. But later within a week bitcoins seemed a failure for the US citizens. After this, in order to find out the correct result of the performance, the correlations between bitcoins and the stock markets of the USA were taken into consideration.
With the effect of the COVID -19 as a pandemic, the World Health Organization also brought in some reports to the US government. The samples that WHO used for the representation of their study were the samples collected on 12th March 2020. The samples collected from 12th March were compared to the samples collected on 18th March 2018. The result was quite shocking but not unexpected, the proved result was that like all other financial markets, bitcoin market was also harmed. It was found that the correlation between the US stock market and the bitcoins was 0.6353. This result was gathered after the sampling was successfully done by the World Health Organization, after controlling the gold market.
The gold market almost lived up to the expectation of the investors and the was followed by the bitcoin investors.
Conclusion
The above-mentioned study and the sampling by WHO were done to find out the hedging abilities of Bitcoins. Bitcoins which are also known as digital gold has the full capability to hedge the investor during the time of financial crises. High-risk investments can be done with the support of Bitcoins or cryptocurrencies. They have fewer chances of effective loss in the financial market. Many have shown other studies and samples to show that bitcoin can not prevent the loss but the real result has been brought out by the World Health Organization.
