Bitcoin surged past $7,200 in the early hours of the morning. Will the surge in unemployment claims in the United States finally make Bitcoin a safe-haven asset?

The price of the entire cryptocurrency market seems to be entering a positive upward range. In the early morning of Beijing time today, Bitcoin rose rapidly, breaking through $7,200, which is nearly $1,000 higher than yesterday's lowest point of $6,200. The highest increase in 24 hours reached 17%, setting a new high in nearly a month. At the same time, many competing coins broke through the highs of the past few weeks. What is the reason behind the sudden surge in Bitcoin?

Fear of fiat currency inflation is driving people into crypto

Last week, politicians around the world did their best to promise massive bailouts and stimulus packages to alleviate the pain of rising unemployment and catastrophic economic recession. The public was relieved by these relief policies, but they were wildly criticized by economists. These experts asserted that these rescue moves would almost certainly lead to massive inflation of fiat currencies and cause more financial and economic pain in the future.

Indeed, over the past few days, criticism of politicians for these rescue plans has been growing. Most notably, analysts have explicitly stated that the Fed's decision to print $2 trillion will significantly devalue the dollar.

Not surprisingly, more and more investors are moving their assets into cryptocurrencies that have a fixed supply and are not manipulated by central banks. This asset transfer activity reinforces the idea that the public is increasingly trusting Bitcoin and altcoins to maintain their value during economic crises. However, the editor believes that this view is debatable, and Bitcoin has not demonstrated a clear safe-haven ability in the current crisis.

As unemployment claims surge in the U.S., Bitcoin is used as a hedge

In explaining this price increase, analysts mostly point to investors' desire for safe-haven assets. According to data provided by the U.S. Department of Labor (DOL), Americans filed 6.6 million unemployment insurance applications in the week ending March 28. In addition, DOL data also showed that more than 3.3 million Americans filed unemployment claims in the previous week. As the fight against the new coronavirus continues, businesses across the country have closed their doors and unemployment applications have been flooded.

John Iadeluca, founder and CEO of multi-strategy fund Banz Capital, said: "The latest updated U.S. unemployment claims report helped drive a sharp rise in Bitcoin prices."

“In addition, yesterday marked the official start of the second quarter of 2020, which will bring with it common tax benefits for new or increased capital in the alternative investment markets,” he said.

“The surge in unemployment claims, accompanied by a nearly 50% increase in benefits for citizens, prompted a shift in investment into what might be considered ‘safe haven assets’ as data pointed to rising economic concerns over the coronavirus. This could be further supported by the sharp rise in gold and commodity futures over the past 48 hours.”

This view was also supported by Marouane Garcon, managing director of crypto derivatives platform Amulet.

He said:

“I think people are looking for things that they think will provide cover for what’s going on in the traditional markets.”

“The headlines today are getting more and more scary, so people are trying to figure out where they can go for protection. I don’t know if Bitcoin is the safest place, but many are willing to try.”

Tim Enneking, managing director of Digital Capital Management, offered a different take on the situation.

He noted:

“QE1, 2, 3 and unlimited QE coincided with the surge in Bitcoin.”

However, Enneking said the latest round of QE “will amount to trillions of dollars in a matter of months.”

“It certainly devalues ​​the currency — unless currency value is relative (exchange rate), and if everyone devalues, the devaluation won’t be felt. Except compared to something like BTC which has a limited supply.”

“So my interpretation of the current rally (and I expect it to continue) is that BTC will (eventually) become a safe haven, not from a temporary economic downturn, but from a money “printing press”.

Analyst says Bitcoin is ‘resilient’

“I’ve been really impressed by the recent resilience of Bitcoin,” said Evan Kuo, CEO and co-founder of digital currency firm Ampleforth.

He added:

“It’s possible that enough initial panic selling of Bitcoin has occurred that people are temporarily willing to speculate on the asset.”

“Bitcoin’s P/E ratio, GDP forecasts, employment rates, and other factors pose uncertainty to reasonable valuations, so Bitcoin is less affected than stocks,” he said.

“All of this proves that Bitcoin is an interesting asset to watch after the fear subsides, especially if we face a slow macro recovery.”

In mid-March, crypto investors rushed to liquidate millions of dollars of crypto assets for quick cash, triggering a crypto market crash as most began to worry about the deepening economic collapse that would lead to shutdowns.

It’s now clear that this sell-off also created a lot of buying demand across the blockchain space at the time. With Bitcoin falling below $7,000, the temptation to buy was strong. The same was true for many altcoins, some of which hadn’t reached such lows in over a year.

Market fundamentals remain strong

2020 was a year of high hopes for Bitcoin, a very strong year. Before the COVID-19 crisis, the cryptocurrency market was in full swing. Importantly, the block reward halving was expected to push prices much higher. Today, these fundamentals have not changed, and optimism is growing that the flagship cryptocurrency may end the year with a strong performance.

In fact, many cryptocurrencies, including Bitcoin, have very strong network activity. For example, the growth of decentralized finance (DeFi) is pushing Ethereum activity to new levels. Smaller alternatives such as Chainlink, Stellar, and others have also experienced significant growth in real-world applications. These will attract the attention of investors.

There is no doubt that the entire cryptocurrency market will continue to remain volatile in the coming days. However, today's market shows that at its core, the entire crypto market is still in a very healthy state.

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