Where to put savings to keep them protected during a crisis? When’s the right moment? Isn’t the crisis actually an opportunity? If you’ve been recently looking at the cryptocurrency market or considering putting cash into gold or real estate, this new series may come right on time. We invite opinion leaders to share some thoughts on investments during the COVID-19-related situation.
Vladislav Dramaliev is one of the founders of the Bulgarian crypto community and he is into blockchain technology since 2013. After heading the communications department at the æternity blockchain project for three years, he is currently focused on his crypto donation platform BitHope.org, the monthly Sofia Crypto Meetup event, and on exploring Decentralized Finance applications. Between 2014 and 2018 he also ran CoinFixer.com, a platform aimed to provide up-to-date information regarding and easy access to the rapidly growing field of cryptocurrencies. Vladislav holds a master’s degree in Contemporary European Studies from the University of Sussex.
Trending Topics: How is the crypto market doing ever since the coronavirus outbreak?
Vladislav Dramaliev: The initial outbreak in China did not result in any significant selloffs. Actually, after the first reported Coronavirus case in China – December 24, 2019 – the total crypto market capitalization started appreciating, gaining 100b USD in the period December 24, 2019 – February 14, 2020. That was entirely in line with expectations of a bullish year due to, among others, the upcoming Bitcoin halving, improving technical indicators, and US Presidential elections.
After Valentine’s Day, however, the reality that the Coronavirus may become a global threat and have serious adverse effects on the world economy began to sink in. The exponential increase in new cases throughout the globe and a rising number of deaths turned greed into fear, causing a panicked liquidation of assets and a voracious appetite for cash.
Stocks, commodities, and indices all plummeted on February 12, 2020. Bitcoin did not prove to be a safe-haven asset, at least in the short term, and lost about 15% of its value between February 12 and March 1. A major selloff started on March 7, culminating in the most significant single-day drop in the history of crypto – 50% on March 12, the price of bitcoin reaching a low of 3913 USD.
Since bitcoin’s correlation with other major cryptocurrencies and tokens is almost perfect, and its market dominance is over 63%, the overall crypto market capitalization fell by 50% and has currently settled in the 150b USD range.
How do you think it will develop in the next 2-3 months, what about half a year from now?
I expect more volatility in the crypto space in the next 2-3 months. The price of bitcoin may test the 3000 USD level if the irrationality among institutional, but primarily retail investors persists, fueled by more negative news about the Coronavirus pandemic.
I am confident that in about a year, the markets will settle down, and even if the pandemic is ongoing, people would have already adapted to the new reality. The Coronavirus threat is grave, and there will be severe economic consequences, but the markets are overreacting. That’s a standard and anticipated reaction in a global environment of fear and uncertainty.
Is it a good or a bad time to invest in crypto now? Why?
Opportunities abound for both – traders and investors. The former crave volatility, while the latter can acquire crypto (and a wide variety of other assets) at significant discounts.
Periods of irrational exuberance are the best time to decrease crypto exposure, while periods of extreme fear represent great buy opportunities.
The value proposition of cryptocurrencies, and Bitcoin in particular, remains unchanged. It is still an asset that is easy to store and transfer, has limited supply, and will not be negatively affected by the extreme quantitative easing and “helicopter money” policies that central banks worldwide are currently adopting as a crisis response.
As fiat currencies continue to lose their value due to inflation, the price of bitcoin will rise. Bitcoin and other cryptos exist to provide [long-term] hedge to a debt-ridden, financial system and dysfunctional monetary policies.
Is money safe in crypto? What should people who have invested do now and how long term could one plan?
Short-term, money is not safe in any other asset but fiat. But my understanding of fiat is a bit skewed. I feel more confident holding stablecoins like DAI, USDC, and USDT in a hardware wallet than money in a bank or cash under the mattress. Those, of course, have their unique risk profiles but are very liquid, stable, and are entirely under my control.
If you have invested in crypto and are not forced to sell it to cover living expenses or debt payments, keep it. Its value will appreciate in time. How long should you have to wait? I am confident that your crypto portfolio (if it composed mainly of top 20 cryptocurrencies) will recover its value in two years, perhaps earlier. If you have some fiat lying around – it is time to buy.
Do you think the current plunge of the cryptomarkets will have any impact on the development of the blockchain industry? What?
The blockchain industry is used to hardships. The disillusionment following the ICO “bubble” of 2017/2018 should have made projects in the space more resilient. If they have received proper financial advice (and have acted on it), crypto companies should have enough cash to push through the Coronavirus-instigated ice age (following the crypto winter).
I am confident that crypto projects in the nascent blockchain industry are uniquely well equipped to deal with cash flow issues. The reason is rooted in one of their most frequent critiques – that they can’t attract a mainstream userbase. Most of them are still in the growth stage. Their financial health does not depend primarily on user-generated revenues but on funds already committed to them by users and VCs.
Furthermore, since it is part of the IT industry, most hired staff in the blockchain space is either remote or could comfortably accommodate prolonged periods of remote work.
Generally, I think it is business as usual for blockchain.