The cryptocurrency market started in late February to experience, along with the stock and oil markets, a recession due to the coronavirus pandemic. The sale off of cryptocurrencies as well as of other assets was caused by the fact the former were being perceived as unable to take on the role of a safe haven asset. However, there is a high chance that cryptocurrencies will keep their safe haven potential in a more serious crisis, and some are already doing well in resisting the fall.
Cryptocurrencies fall along with indices, but may go against the trend later
Leading cryptocurrencies are currently following the trend of stock indices, and investors perceive them as “risky assets” with a high volatility. During a stock market crash, such assets are dumped first. This pattern was especially apparent in mid-March, as the correlation between the exchange rates of Bitcoin (BTC) and the US S&P 500 stock index was at an all-time high.
However, in the next couple of months the cryptocurrency trend may very well start to behave independently from the spread of the pandemic.
If the pandemic gets alleviated, indices will start to recover along with cryptocurrencies. But if the situation gets worse, the safe haven potential of cryptocurrencies may very well be brought to the forefront, namely their ability to remain functional when the traditional financial system fails (for example, during power outages or a quarantine in the banks). This enables a crypto market rally even when the stock market is in a recession.
The profitability of cryptocurrency mining is another factor that makes a further drop in crypto values less likely. At a price less than $4,000, BTC mining is unproductive almost everywhere. The number of sellers drops sharply, while the number of buyers skyrockets (which was very apparent on March 12). After BTC's value halving scheduled for May, this virtually impenetrable lower boundary may rise even higher.
However, not all cryptos follow BTC's trends. Some of them, unlike BTC, have been showing a positive trend since the beginning of 2020, and therefore merit greater attention from investors.
Crisis-Resistant Cryptocurrencies
Today, on March 18, BTC costs $5,100, and before the start of the rally on January 1, its price was $7,200. This is a net loss of around 25%. However, some of the other currencies rose in price so sharply in January and February that they still maintain a net increase. Let us see the first 30 cryptos by market cap, and list those that went up in price by at least 5% between January 1 and March 17.
- OKB (OKB): +32%. The native token of the OKEx trading platform.
- Bitcoin SV (BSV): +18%. A controversial fork of Bitcoin Cash, developed by Craig Wright, who is trying to claim the title of “the true Satoshi Nakamoto”. The coin was frequently accused of being centralized and vulnerable to manipulation, but currently it holds firmly to its place among the top ten cryptos by market cap.
- Chainlink (LINK): +13%. An oracle network created to enable the functioning of smart contracts for a number of other blockchains, such as Ethereum (ETH) or Tezos (XTZ).
- Unus Sed Leo (LEO): +10%. The native token of the Bitfinex platform.
- Tezos (XTZ): +7%. The most popular PoS currency for staking. It is actively used for this purpose since late 2019. It is considered to be one of the least centralized PoS currencies.
- Ethereum Classic (ETC): 7%. An ETH fork, founded in 2016 after a conflict with the DAO fund. Unlike ETH, there are no plans for it moving from PoW to PoS, and it firmly holds its position as one of the best currencies for mining with graphics cards.
- Dash (DASH): 6%. One of the most popular anonymous cryptos. It may not be available on all trading platforms, but is fairly independent from classic cryptocurrencies such as BTC and its main forks.