With the COVID-19 pandemic still raging on and upsetting markets, Bitcoin has outperformed the Nigerian stock market and even most global equities; only performing worse than gold. Investors attribute Bitcoin’s performance to bets/bids that have been made to hedge against inflation.
In 2020, Bitcoin has only posted a loss of around 5%, compared to respective drops of 17.5% and 18% for the Nigerian and MSCI All-Country World Index. With a market capitalization of over $126 billion as at April 22, 2020, it is much bigger and more liquid than the Nigerian stock market (market capitalization less than $31 billion dollars —N11.793 trillion est. April 21, 2020).
Like stocks and other riskier assets, Bitcoin climbed up in the wake of massive stimulus packages launched by fiscal authorities and central banks around the world last month to ease the economic damage caused by the COVID-19 outbreak.
In addition, with a supply pegged at 21 million, its rarity gives it an intrinsic value and protects it from global central banks’ moves or policies that encourage inflation.
However, in 2020, bitcoin performed poorly against popular safe havens like gold. Just last month alone, Bitcoin slumped more than 35%, showing that gold has proven far more resilient than Bitcoin
Bitcoin which is notorious for high price swings, has found its use as a means of digital payment and scared off institutional investors such as pension funds. It has however attracted hedge and quant traders, who make money on short-term price swings.
As its volatility soared, major cryptocurrency exchanges saw huge movements in volume last month. Many speculators sold off the cryptocurrency (like other assets) to raise money.
“I’m long gold, I’m long bitcoin – we are seeing a monetization of debt like we have never seen in our lifetimes,” Novogratz said in a Monday interview with Bloomberg TV. “To me in the long run, that has to make hard assets look better.”