Introduction
Bitcoin is used as a hedge weapon by many investors during the global financial changes. However, by the grace of nature, the bitcoin market has not been less affected by the COVID-19 effect.
Here we will analyse the changes and the movement of the global financial changes alongside the relation between bitcoins and global finance. The basis of this analysis will be Bitcoin’s price, stock price, bond price, price of gold, real estate price and also the price of the oil.
There have been many bitcoin traders working well in the market, but they have also undergone changes due to COVID-19. Bitcoin Trader V2 has seen some major changes and they have been remarkable.
Rolling Change of Various Assets with Respect to Bitcoins
There has been a crash in the past two months and the claim of bitcoin is “digital gold” has been put into test. The so-called financial “safe haven” has been on the meters of judgment during this crucial time.
A rolling correlation diagrammatic representation has shown that bitcoin is now related to many other physical assets and not only related to gold. Bitcoins have always been treated as sign of relief amidst all economical imbalance. But the scenario stands different this time while comparing bitcoins with other global assets.
Has Bitcoin Faced Natural Gold Fare?
Bitcoin or the “digital gold” which is already getting some hard time in the financial market, it must be mentioned that physical gold has failed to give shelter to the investors. Physical gold has also failed to give shelter to the investors during this short-term financial crisis.
All the relation between financial assets and gold have been affected. This proved that all the financial sectors are deeply interconnected with each other. If one is affected all others would be affected automatically.
Bitcoin and Portfolio Correlation
The father of the portfolio, Harry Markowitz found out the most significant aspects of using bitcoins. According to him, the major risk is the risk of an asset. If one considers bitcoins as an asset and if it brings risk to the portfolio then it is a major risk. The asset i.e bitcoin also acts as a risk in isolation.
If explained in clear terms, a bitcoin can’t be a risk it is negatively related or inversely related to the other aspects in a portfolio. Mangers of the asset who are not correlated often find it difficult to compete with the portfolio managers. Portfolio managers cleverly manage the volatility of their assets. All the financial sectors are directly and indirectly related to Bitcoin marketing in the finance sector.
Portfolio managers can easily manage the bitcoin flow if the other financial sectors remain affected.
What is the Real Case?
If two portfolios are compared say one portfolio of 100% stocks and the other one of 80% stocks and 20% bitcoins. Then the stock of 80% stock and 20% bitcoin is expected to do outstandingly well in the market. However, in the past two-three months, bitcoin investments have been avoided strongly. Whereas bitcoins are expected not to be too surprising when all other financial sectors are in deep shock.
Conclusion
Amidst all ups and down only time will tell whether cryptocurrencies could still be entrusted fully during financial crisis times. Time will judge whether bitcoins will be able to live up to the expectations of the investors or will it still be the “safe haven”. In a tightly-knit economic patch, the bitcoin could be a beautiful lie or a deadly truth. The real-time is yet to come, major changes will be counted after the COVID-19 washes away from the globe completely.
