Market Panic and Digital Money Performance During Economic Crisis

New Characteristics of Economic Crises

Economic crises in history often stem from purely economic issues and can usually be resolved through economic means such as lowering interest rates and printing money. Each crisis leads to a number of businesses going bankrupt while giving rise to another batch of enterprises; some people go bankrupt as a result, while others become wealthy.

However, the current economic crisis is unique and cannot be solved solely from an economic perspective. Government statements have gradually undermined business confidence, even though many official declarations attempt to downplay the impact of the COVID-19 pandemic.

In fact, this virus is indeed unusual: humans know very little about it, it strikes fiercely and is initially not taken seriously, leading to serious consequences. Its characteristics, such as a long incubation period, strong infectivity, and high mortality rate, make it a "nuclear weapon" on a biological level.

Leaders and central banks in some countries initially showed a dismissive attitude towards the COVID-19 virus. This may be due to a genuine lack of understanding of its power, or it may be a feigned ignorance. The general public may be the former, while governments and central banks are more likely to be the latter, as they do not want the stock market to decline.

In this situation, some central banks of certain countries have taken extreme measures, such as emergency interest rate cuts to zero. This is akin to a doctor facing a seriously ill patient, prescribing all medications at once, which instead triggers greater panic in the market.

Bitcoin: Safe-Haven Asset or Risk Asset?

Previously, it was widely believed in the cryptocurrency circle that Bitcoin was a safe-haven asset. When gold prices rise, Bitcoin often follows suit, reinforcing this impression. However, during this financial crisis, Bitcoin's performance did not align with the characteristics of a safe-haven asset, but rather resembled that of a risk asset.

Recently, Bitcoin has shown a clear correlation with risk assets such as crude oil and stock indices, while its correlation with gold is relatively weak. This indicates that Bitcoin is viewed as a risk asset during global financial crises.

People view Bitcoin as a safe haven primarily based on two reasons:

1. Compared to fiat currency, Bitcoin has a limited supply, which may resist inflation; it is easy to manage and store, and is not affected by the risk of bank failures; during turbulent times, it is easy to carry and transfer, and can avoid asset freezes.

2. Hedging attributes and hedging sentiment are two different things. During periods of low market volatility, investors may engage in speculation driven by hedging sentiment. However, the hedging sentiment under speculative conditions does not equate to actual hedging attributes.

The Rise of Dark Horses in the Digital Money Market

During this financial crisis, the only mainstream digital money that has risen is USDT. From October last year to now, investors holding USDT have gained the maximum profit, with the price of USDT rising by as much as 20%, while other major coins have generally fallen by about 25%.

Although USDT is not the only stablecoin, it has the largest market share. Its internal structure shows that ERC20-USDT accounts for 61.35% of the total market value of USDT and 50.99% of the total market value of stablecoins.

USDT refers to the fiat currency model, choosing to increase issuance without disclosing information. Although some people are concerned that USDT may collapse, from an economic perspective, moderate issuance will not lead to a price crash, similar to the case with the US dollar.

Shift in Investment Philosophy

In the face of the current situation, investors need to adjust their view of Bitcoin, seeing it as a risk asset rather than a safe-haven asset. Investors can adopt either value investing or trading speculation strategies, both of which have the potential to be profitable.

It is worth noting that an economic crisis may be a rare opportunity for ordinary people to achieve social mobility. A global financial crisis like the current one may only occur once or twice in a lifetime.

Investors should view market fluctuations rationally, make cautious decisions, and avoid blindly following trends. At the same time, it is important to recognize that every crisis contains opportunities; the key lies in how to seize them.