Market Cap
24h Vol
7051
Cryptocurrencies
76507
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2021-09-20

Global stock market crash and safe bitcoin

BTC's lack of integration with traditional finance and its inability to be forcibly sold to cover financial losses means that the price may not "crash" if a global stock market crash occurs.

One reason for Bitcoin's (BTC) volatility, the significant price fluctuations that occur regularly, is the divergence of its use cases. Some publicists consider it "digital gold," a truly rare and perfect store of value (SoV). Others consider bitcoin to be a technological project or a type of software with a corresponding network.

The adoption of El Salvador as legal tender will likely be a testament to the functionality of the means of exchange (MoE) that the Lightning Network provides. The Layer 2 scaling solution allows for instant and insanely cheap transfers, though it requires regular on-chain transactions to enter or exit this parallel network.

As these narratives about Bitcoin change over time, so does the correlation of BTC to traditional assets. For example, there have been sustained periods of strong

The March 2020 crash was devastating for almost every asset class, but the recovery pattern that followed those six or seven months was virtually identical for gold and Bitcoin. Interestingly, the reverse move occurred in 2021, showing an inverse correlation between the two assets.

However, cryptocurrency has an advantage over traditional markets such as commercial real estate, stocks and bonds. Lenders will seize these assets if customers default on their payments, and this adds pressure because the bank or institution has no interest in holding on to them.

On the other hand, bitcoin and cryptocurrencies in general cannot be used as collateral.

As for the billion-dollar liquidations of Bitcoin futures in the derivatives markets, these are just synthetic instruments. Undoubtedly, these events will affect the price, but at the end of the day, effective BTC remains in the derivatives exchange. It only moves from the long (buyer) balance to the short (seller) account.

Until bitcoin fully takes root in the financial markets and is accepted as a security and depository, the medium-term systemic risk for cryptocurrency is lower than for the traditional market.

The views and opinions expressed here are solely those of the author and do not necessarily reflect those of Cointelegraph. Every investment and trading move involves risk. You should do your own research when making decisions.