Crypto markets have corrected today but stock markets continue to surge despite mounting warnings of economic despair ahead. When the bubble bursts will investors turn to digital assets as a safe haven?
Stocks Up Amid Virus Fears, Crypto Dumps
The current scenario on Wall Street is deceptively bullish in a country where red lights are flashing all over the economic board. Add to that the escalating fears over the Covid-19 (Coronavirus) outbreak and the slowing down of Asian economies, and it is a recipe for danger ahead.
According to reports, Goldman Sachs sounded the alarm to clients this week about a possible correction in the stock markets. Strategist Peter Oppenheimer wrote;
“We believe the greater risk is that the impact of the coronavirus on earnings may well be underestimated in current stock prices, suggesting that the risks of a correction are high,”
Major US stock indexes have taken the influenza outbreak news in their stride and on Wednesday the S&P 500 and Nasdaq Composite jumped to record highs.
Speculative stocks like electric-vehicle maker Tesla, and space tourism firm Virgin Galactic Holdings, also surged. So far this month Virgin stock is up 118% this month while Tesla has gained over 41% in February alone.
Oppenheimer added that a sustained bear market does not look likely but a near-term correction is looking much more probable.
Gold prices are also hitting seven year highs and bitcoin is up 34% this year despite its thousand dollar dump yesterday.
Crypto industry insider Ran NeuNer also exercised caution adding that there are a number of factors that could burst the bubble in addition to the Covid-19 outbreak.
Just keep telling yourself it’s going to be ok & markets will keep going up,don’t worry about;-Corona Virus-China printing crazy amounts of money to support markets.-USA printing unprecedented amounts of money-a possibility that Bernie is next -0% interest worldwide
— Ran NeuNer (@cryptomanran) February 20, 2020
Central banks of the world’s two largest economies have both been injecting liquidity into their failing banking systems by printing more money.
The US Federal Reserve has doled out tens of billions to calm the short-term lending markets after they went haywire in September. According to Bloomberg the Treasury has initiatives to ensure it always has enough cash to pay its bills as the deficit soars to a trillion dollars and this could make things difficult for the central bank.
China is having its own problems with cities housing up to 50 million people under lockdown and citizens being shunned across the world as fears of a pandemic intensify. Asian economies are feeling the pinch also and those heavily dependent on tourism such as Thailand are getting battered.
The crypto and bitcoin safe haven narrative has never been stronger than in 2020 and when the stock bubble finally bursts those dollars could flood into crypto markets.
Will crypto markets continue to climb this year? Add your thoughts below.
Source: https://bitcoinist.com/how-stock-market-bubble-fears-could-fuel-crypto-investment/