The whole world is quarantined, small and medium-sized businesses are literally demolished, unemployment rates are reaching new highs, and people are running out of money. At the same time, the crypto industry witnessed capital inflow and intensive growth of interest in the first quarter of 2020. This article will concentrate on whether the crypto market can be expected to become the next “Gold Rush” of the modern days.
The story behind the Gold Rush
During periods of the financial crisis, people tend to actively search for alternative sources of income in order to ensure survival:
- An early example of a financial crisis that led to a Gold Rush was the recession and massive bankruptcies of the 1890s. The US economy was severely affected by the stock market panic of 1893 and 1896, which caused widespread unemployment and forced a lot of people towards mining gold. This time period is described in detail here. Nothing scared the desperate newly-made prospectors — not the long journey of up to 2000 miles away, not the necessity to spend savings on equipment and land, and not even the lack of guarantees to find gold.
- After the financial crisis of 2007–2008 in the United States and the significantly increased unemployment rate, Americans from all over the country, who tried to solve financial problems, came to California searching for gold. People bought metal detectors and other modern equipment in bulk. 160 years after gold was first discovered in California people came to try their luck again
We will have a look at the US market, as the most liquid one in the crypto industry.
Global Crisis breathing down the neck
Coronavirus has already sparked the Gold Rush around the world, as reported by WSJ. As the pandemic takes hold, investors and bankers are encountering severe shortages of gold bars and coins. Dealers are sold out or closed for the duration. Besides the fact that gold is extremely popular with survivalists and supporters of various conspiracy theories, it is also a hedge against volatile assets, which now seems to be an essential part of any portfolio. This is especially true as the Fed steadily inflates the economy, printing unlimited amounts of money.
The whole world is in quarantine; the economy has stopped for the first time in history, it is transforming and will not be the same. All sectors are under attack: cross-border deliveries and payments are suspended, oil is down, unemployment rates have been growing at unprecedented levels. Traditional financial markets and institutions are forced to adjust. This unique type of situation calls for extraordinary solutions, hence investment funds and private investors are looking towards the cryptocurrency market in search of new opportunities.
The new gold
Meanwhile, despite all the troubles, interest in the crypto industry has been increasing daily since the beginning of the year. Here are a few of many confirmations:
- Bitcoin halving mentions are close to overtaking the mentions of Coronavirus — TheTie.
- The demand for online Bitcoin courses has grown by 300%.
- Bitcoin HODLer net position change has been growing daily since the end of March and is now hitting yearly highs — Glassnode
- The trading volume of cryptocurrency derivatives in the first quarter of 2020 increased by 314% over the 2019 average — TokenInsight.
- Binance trading volumes broke the January 2018 record.
- Nasdaq announced an integration of the Corda blockchain into its platform.
- Bitcoin entered the top 20 trend topics on Weibo.
- Bloomberg terminals now use the Ethereum blockchain to rate assets.
- Andreessen Horowitz venture fund raised $515 million in its second fund, much more than the expected $450 million.
- Wyoming has authorized investment in digital assets by an insurer. Starting July 1, Wyoming insurance companies will have the opportunity to invest in digital assets, including Bitcoin.
- On March 12–13, 2020 world indexes updated multi-year while Bitcoin followed. During this Black Swan event in traditional financial markets an acute shortage of BTC and USDT appeared on the OTC markets. There was a considerable number of people wishing to acquire crypto assets even despite high commissions, reaching 10–15%. Over the course of several days, Bitcoin has recovered over 50% of its loss and is now back in a positive upward trend.
Finally, the leading news of recent days: the People’s Bank of China (PBOC) is starting tests of the digital Yuan, with Starbucks and McDonald’s among the 19 restaurants and retail stores that will participate in testing the state cryptocurrency of China.
The news about one of the leading economies in the world launching state cryptocurrency and attracting global corporations to take part is a highly positive signal for the market and blockchain technologies. The digital Yuan, however, is the first fiat-based currency of Chinese citizens that has now acquired new routes to the market.
What does the technical analysis have to say?
Of course, we will not disregard the technical analysis and will see what the charts have to say in support of our theory.
Bitcoin closed April with a takeover, which opens up an opportunity for the major flag figure to appear:
The altcoin market shows a breakthrough of a trend with increasing volumes during a period of long-term consolidation, which can lead to a positive impulse:
Globally, the market shows a trend retest, with increasing volumes, which is a bullish setup:
Time will tell
Is the next Gold Rush to overtake the market? Nobody can tell. However, based on many current indicators we mentioned above, a new cryptocurrency market growth cycle is likely to be just around the corner.
The information above contains an analysis and forecast of the cryptocurrency market, which are associated with high risks. This information is presented for informational purposes only and in no way should be construed as a recommendation for the purchase or sale of the assets. Any person considering trading digital assets should seek independent advice on the suitability of any particular digital asset.