Bitcoin broke through $ 7,200 in the early morning, and the surge in US unemployment applications made Bitcoin a safe-haven asset?

The price of the entire cryptocurrency market seems to be entering a positive and upward range. In the early hours of Beijing time, Bitcoin quickly rose to a maximum of $ 7,200. Compared with yesterday ’s lowest point of $ 6,200, it rose by nearly a thousand dollars, and the highest increase in 24 hours reached 17%, a new high in nearly a month At the same time, many competing coins have broken through the highs of the past few weeks. What is the reason behind Bitcoin's sudden explosion?

Fear of fiat currency inflation is prompting people to enter the cryptocurrency

Last week, politicians around the world made every effort to undertake large-scale rescue and stimulus programs to alleviate the disastrous suffering caused by the increase in unemployment and the economic recession. The public was relieved by these relief policies, but was slapped wildly by economists. These experts assert that these bailouts will almost certainly result in large-scale inflation of fiat currencies and cause more financial and economic suffering in the future.

In fact, in the past few days, there has been increasing criticism of these bailout plans from politicians. Most notably, the analysts made it clear that the Fed ’s decision to print 2 trillion US dollars will depreciate the US dollar significantly.

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Not surprisingly, more and more investors are transferring their assets to cryptocurrencies that have a fixed supply and are not manipulated by the central bank. This asset transfer activity reinforces the notion that the public increasingly trusts bitcoin and competing currencies during the economic crisis to maintain their value. However, the editor believes that this point of view is open to question, and Bitcoin has not demonstrated a clear risk aversion ability in the current crisis.

The number of unemployed applicants in the United States skyrocketed, and bitcoin is used for hedging

In explaining this price increase, analysts mostly pointed out investors' desire for safe-haven assets. According to data provided by the US Department of Labor (DOL), in the week ending March 28, Americans filed 6.6 million unemployment insurance applications. In addition, DOL data also shows that more than 3.3 million Americans filed unemployment claims the previous week. As the new coronavirus continues, businesses across the country have closed their doors, and unemployment applications have become widespread.

John Iadeluca, founder and CEO of the multi-strategy fund Banz Capital, said: "The latest update of the United States' unemployment relief application report has helped to drive the price of Bitcoin up sharply.

He said: "In addition, yesterday marked the official start of the second quarter of 2020, which will bring common tax incentives for new or new capital in the alternative investment market."

"The large increase in unemployment benefits applications has also been accompanied by a nearly 50% increase in the size of citizens receiving benefits. The data shows that the economic concerns caused by coronavirus have increased, prompting investment to be transferred to places that may be considered as" safe havens ". The sharp rise in gold and commodity futures in the past 48 hours can further support this. "

Marouane Garcon, managing director of crypto derivatives platform Amulet, also supports this view.

He says:

"I think people are looking for things they think can cover what happens in traditional markets."

"Today's headlines are getting scarier, so people try to figure out where they can go for protection. I don't know if Bitcoin is the safest place, but many people are willing to try it."

Tim Enneking, managing director of Digital Capital Management, put forward different views on this situation.

He pointed out:

"QE1, 2, 3 and Infinite QE coincide with Bitcoin's skyrocketing."

However, Enneking said that the latest round of QE "will reach trillions of dollars in a few months."

"It definitely devalues ​​the currency-unless the value of the currency is relative (exchange rate), and if everyone depreciates, you won't feel the depreciation. Except when compared to things with limited supply like BTC."

"So my explanation for the current rise (and I expect it to continue) is that BTC will (eventually) become a safe haven, not from a temporary economic recession, but from the currency" printing machine. "

Analysts call Bitcoin “elastic”

Evan Kuo, CEO and co-founder of Ampleforth, a digital currency company, said: "I have been deeply impressed by the resilience of Bitcoin recently."

He added:

"There may have been enough initial panic selling of Bitcoin, and people are temporarily willing to speculate on assets."

"Bitcoin's price-earnings ratio, GDP forecast, employment rate and other factors constitute an uncertainty to a reasonable valuation, so bitcoin is less affected than stocks." He said.

"All of this proves that after fear fades, Bitcoin becomes an interesting asset to watch, especially if we are facing a slow macro recovery."

In mid-March, cryptocurrency investors scrambled to liquidate millions of dollars of crypto assets in order to obtain fast cash, triggering a plunge in the crypto market. Most people begin to worry that the economic collapse will lead to a shutdown.

It is now obvious that this sell-off also created a lot of buying demand in the entire blockchain field at the time. As Bitcoin fell below $ 7,000, the temptation to buy was very strong. The same is true for many competing coins, some of which have not reached such low levels in the past year or more.

Market fundamentals remain strong

Regarding bitcoin, 2020 is a year of high expectations and a very strong year. Before the outbreak of the COVID-19 crisis, the cryptocurrency market was in full swing. Importantly, halving the block reward is expected to push the price much higher. Now that these fundamental factors have not changed, people are increasingly optimistic that this flagship cryptocurrency may achieve strong performance at the end of the year.

In fact, many cryptocurrencies, including Bitcoin, have a very strong intensity of network activity. For example, the growth of decentralized finance (DeFi) is pushing Ethereum activity to a new level. Smaller alternatives such as Chainlink and Stellar have also experienced significant growth in the real world. These will attract investors' attention.

There is no doubt that in the next few days, the entire cryptocurrency market will continue to remain volatile. However, today's market shows that from the core, the entire crypto market is still in a very healthy state.

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