A new and wildly unusual COVID-19 lockdown strategy proposal for slowly reopening the economy has many investors and financial analysts scratching their heads, and it could impact Bitcoin‘s recent bullish momentum.
Bitcoin And Other High-Risk Assets Like Stocks Remain Exposed to Another Collapse
Fear, uncertainty, and doubt. FUD is among the most commonly used terms in the crypto space, as those three powerful emotions have the potential to cause massive, panic-induced selloffs.
The fear of the novel coronavirus in early Q1 2020 and uncertainty over how it would impact the economy caused investors to doubt their investments and dumped holdings for cash in a catastrophic collapse and liquidity crisis.
The selloff was so strong, the day is now referred to as Black Thursday.
During the selloff, the stock market tumbled, Bitcoin crashed over 50%, and even safe haven assets like gold fell from highs. Later on, as things got worse, oil prices fell into the negative for the first time in recorded history.
But once stimulus checks started arriving, and lockdown measures began flattening the curve, the stock market began surging and Bitcoin has been on a steady, sustained upward trend.
Markets May Tumble If Unusual Rolling Lockdown Plan Leads To Fear And Uncertainty
Today, however, Bitcoin price began to crash, potentially on the heels of the latest news that an unusual economic reopening strategy has been revealed that may cause further uncertainty.
As was seen on Black Thursday, when investors are uncertain, doubtful, or fearful, high risk assets are the first to get dumped.
Gains seen in the stock market could be erased, and Bitcoin and cryptocurrencies could see another powerful collapse. The global economy is on thin ice and even the slightest setback could cause another major market crash.
The plan suggests a cycle of 50-days worth of mitigation measures in full force, followed by 30 days of more lax measures.
The strategy is said to reduce the reproductive rate of the virus.
While this could let the suppressed economy breathe and allow for a more sustainable solution to the abrupt change in everyday life, it could also cause such uncertainty that there’s no chance of an economic recovery at all.
And during the 30 days of the more lax policy, it could theoretically undo the previous 50 days of stricter measures only making matters worse.
The economy must reopen for things to get back to normal, but given the pandemic’s stronghold over the world, some sort of rolling lockdown may eventually be the new normal altogether. How this impacts Bitcoin is anyone’s guess, but the high risk asset could be in trouble as a result.