The current situation of the world has left the energy demand to fell off a cliff. The May future contract on West Texas Intermediate crude tumbled to minus $37.63 a barrel and the June contract slid 15 percent to about $21 a barrel, leaving the black gold down up to 60 percent in 2020.A 3.5 percent slide has been noticed in Bitcoin.
So, in this oil price sell-off there are some takeaways including:
1: Falling oil prices in the short term are deflationary:
Falling oil prices could help embed deflationary pressures in the economy. Falling oil prices can be beneficial in normal economic circumstances. Oil price crash offers a warning to bitcoin traders who see the cryptocurrency as a hedge against inflation of how deflationary the coronavirus-driven economic recession might turn out to be.
2: Bitcoin doesn’t have storage considerations like oil:
It is physically impossible to take delivery of a barrel of oil shows that this system. But future markets with physical delivery require traders to come up with the goods on the off chance they own a contract going into the expiration date.
3: Bitcoin is holding up amid current chaotic economic situation:
According to a sturdy published by researchers at the Federal Reserve’s Kansas City branch it is noted that bitcoin never worked as a worked well as a safe-haven asset. In this year, Bitcoin is down just 3.8 percent. But recent Oil’s price crash makes bitcoin look stable by comparison.
4: A bitcoin exchange-traded fund application might now compare favorably with oil ETFs:
A downfall of 40 percent in price has been seen in Bitcoin market on March 12 which refers to the risks of cryptocurrency market. And that is the reason the U.S. Securities and Exchange Commission has thus far refused to approve a bitcoin exchange-traded fund (ETF).
On the other hand, the oil market having several approved ETFs runs in the shadow of OPEC.
5: More government bailouts are likely along with more central bank emergency lending:
With the crash of oil prices, banks might face higher loan losses and uncertainty is available in bond markets too. In this situation, Federal Reserve Bank is dedicated to doing everything within their power to support the functioning of financial markets and put the economy on strong footing.
6: Dropping in oil demand shows how rapidly new technologies are taking place in the world:
Due to the blessing of technology, many professionals are working their job from home amid this lockdown situation. Bitcoin, a futurist product, could facilitate as more commerce is done through the internet deducting the usefulness of germy paper bills. Technology has made oil both cheaper to produce and more efficient to use.
7: Supply of Bitcoin is predictable unlike oil:
Recent downfall in economy is because of oil crash in a wide range. The rate of Bitcoin does not change depending on the geopolitical events. Unlike oil, bitcoin’s rate of mission is controlled by its own protocol. A number of states including Saudi Arabia, Russia and Mexico are committing to supply-cutting agreements and U.S. producers are likely to shut production because of this falling profitability.
8: More coronavirus-related market surprises are waiting:
The prices of Bitcoin have become stabilized in recent times after a vast swinging in a range between $6,400 and $7,400. Oil industry executives have been cautious of the potential for storage facilities to fill up without big production cuts. What will happen is unknown and that’s why Bitcoin is trading sideways.
9: Less effect on miner’s profitability:
Whether miner’s profitability will be affected that depends on territory and maybe a shakeout will be seen in Bitcoin market like oil market after halving is done in May if bitcoin prices don’t double in tandem with the halving. To lock in wholesale electricity prices, a number of bitcoin miners use long-term power supply contracts.
10: Bitcoiners are tired of all the darkness:
Actually Bitcoin seems like it’s much worse in the traditional commodity market in terms of the massive dislocation. Some criticisms about bitcoin are being taken away seeing the oil market condition right now.