On March 12th, the Bitcoin price took a hit of over 50% and so did altcoins. The decline marked the largest one-day drop in the leading crypto asset’s price since 2013.
However, Coinbase in its blog noted that this move was led by fear amidst the COVID-19 pandemic which drove investors to cash, inducing a deep liquidity crunch coinciding with broader financial market disruption. During that time, both the S&P 500 and Dow Jones Industrial Average crashed 10%, not seen in decades.
The fact that not just advanced traders but retail investors could avail such exorbitant leverage in an unregulated environment may have proved to be risky for the market. But according to Coinbase, as crypto matures these dynamics would be improved, both from the inside through industry-led initiatives and outside via regulators increasing control.
Recently we reported that the crash in cryptocurrency prices resulted in an increase of 83% in the sign ups of crypto exchange Kraken.
Now, Coinbase has also reported “record-breaking numbers” during and in the 48 hours following the event.
The exchange recorded a 5x increase in cash and crypto deposits while new-user signups saw an increase of 2x, and trading users an increment of 3x, in comparison to the last 12-month averages. Also, the total traded volume spiked 6x.
This suggests, “customers of our retail brokerage were buyers during the drop, and Bitcoin was the clear favorite,” said Coinbase.
And Bitcoin wasn’t the only asset that emerged as the traders and investors’ favorite. Ether (ETH), XRP, Tezos (XTZ), Chainlink (LINK), Litecoin (LTC), and Bitcoin Cash (BCH) all experienced increased traction.
Currently, bitcoin is trading around $6,450, seeing a jump of about 70% from its lows while equities continue to drop. However, the narrative of bitcoin being a safe haven has taken a hit because of the crash.
But Coinbase points out that gold suffered the same way during the 2008 financial crisis when bullion’s price fell over 30% initially. But it doesn’t mean it was a bad store of value, it happened because of the liquidity crisis as it is happening now. After the crash, the precious metal rallied 3x over the next three years.
“Bitcoin was created for a moment like this,” wrote Coinbase, adding, “As the US government turns to slashing interest rates, passing large stimulus packages, and infinite quantitative easing, Bitcoin will soon do the opposite in the next Bitcoin halving. The contrast could not be more stark.”
The flagship cryptocurrency, it noted, is the hardest form of currency that will only ever have 21 million BTC in supply. The network furthermore, isn’t controlled by any central authority.
“Bitcoin’s value prop should not be defined by extraneous market dynamics, but rather by its unique properties that make it a potentially attractive store of value.”