Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Bitcoin has this year done better than both U.S. and world stocks.

DADO RUVIC/Reuters

Bitcoin has fared better than stocks but worse than gold and U.S. Treasuries during the coronavirus pandemic, with investors ascribing its performance to speculative bets and bids to hedge against inflation linked to stimulus measures.

Enthusiasts have laid out numerous narratives for bitcoin as an investment proposition through its first 12 years - from a rebel technology set to upend the financial system to a groundbreaking payments network; from an uncorrelated asset to a hedge against inflation-inducing government policies.

Here are some charts that illustrate bitcoin’s price performance during the coronavirus pandemic - and offer some clues as to what is driving investor behavior.

Story continues below advertisement

OUTPERFORMING STOCKS

Bitcoin has this year done better than both U.S. and world stocks, posting a loss of around 5% compared to respective drops of 13% and 16% for the S&P 500 and MSCI All-Country World Index.

Like equities and other riskier assets, bitcoin surged in the wake of unprecedented stimulus packages launched by governments and central banks in mid-March to mitigate the economic damage caused by the coronavirus.

The cryptocurrency has soared 80% since mid-March, partly because it offers the chance of quick returns as the stimulus measures wash into markets, investors and traders said.

Bitcoin and cryptocurrencies have appealed to investors as “they can offer a potentially higher risk-reward scenario that they cannot find in other assets,” said Michael Sonnenshein, managing director of Grayscale, the world’s biggest cryptocurrency asset manager.

SAFE HAVEN? MORE AN INFLATION HEDGE, INVESTORS SAY

Enthusiasts say bitcoin is immune to the impact of geopolitical tensions or government policy because of its decentralized nature. Unlike central bank-issued money, miners competing to solve computer puzzles produce bitcoin.

With a supply capped at 21 million, the argument goes, its scarcity gives it an innate value and shields it from central banks moves or policies that stoke inflation.

But in 2020, bitcoin fared worse than traditional safe havens like gold, up 11%, and U.S. 10-year Treasuries , gains on which have climbed 14%. On March 12, when bitcoin crashed 40% to its worst single day since 2013, other so-called safe havens proved far more resilient.

Story continues below advertisement

“The idea that it is a safe haven in the manner that gold is - I don’t think recent moves bear that out,” said Sui Chung of CF Benchmarks, a crypto benchmark provider.

Bitcoin’s gains, some investors say, were driven in part by bets it can hedge any future inflation caused by government stimulus measures.

“It’s not just the U.S. story, but more or less every major government is doing that to a similar magnitude,” said Richard Galvin, of crypto fund Digital Asset Capital Management.

“You don’t have many options to hedge that risk.”

BETTING ON PRICE SWINGS

Bitcoin’s notorious volatility has hobbled its use as a means of payment and scared off large, long-term investors such as pension funds - but attracted hedge funds and high-frequency traders, who make money on short-term price moves.

While volatility has gripped markets of all stripes during the coronavirus crisis, bitcoin’s price moves have soared - a boon for speculative traders who seek to trade on spreads across multiple platforms, major crypto exchanges say.

Story continues below advertisement

“You have high-frequency trading firms that trade on the scent of the spread to make money,” said Paolo Ardoino, chief technology officer at the major Bitfinex exchange, adding that they are rarely concerned with narratives surrounding bitcoin.

“Whether it’s milk or potatoes or bitcoin, they would trade anything - so they really don’t care about the philosophical point of view.”

SOARING VOLUMES

As bitcoin volatility jumped, major cryptocurrency exchanges saw huge spikes in volume in mid-March. Many investors sold off bitcoin - like other assets - to raise cash for margin calls, analysts said.

Daily volumes at the world’s top exchanges jumped to $21.6 billion on March 13, their highest in seven months and among the highest on record, research firm CryptoCompare said. Trading of crypto derivatives such as bitcoin futures - often favored by high-frequency traders - also climbed in March to its highest on record.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies