Topic: When the liquidity crisis is over, Bitcoin will perform well, just like gold (Read 161 times)

The cryptocurrency market is very unpredictable and often we doubt its functioning and security. Let us try to understand this fluctuating market from one of the industry leaders and see how his company is changing the preconceived notion surrounding the above-said market.

From an interview with Thor Chan, the CEO of AAX crypto exchange, they talk about the effects of coronavirus pandemic on the cryptocurrency market, prices and more.  

Source and the full interview

How do you judge the right time to invest in the world of digital currencies?

Everything is relative. For example, we will soon be launching our own native exchange token, AAB. In the first three flash sale rounds, we will be offering AAB at a discount - seems like the right time to me.


In addition, AAB will be bought back using 100% of AAX’s futures revenue. The amount of AAB will be shrinking over time. With a deflationary model token, as long as the demand is there, earlier is always better than later.  


Right now, Bitcoin is in search of support slightly above $6,000 - of course, it would have been better to buy in at $1, but Bitcoin still has ample room for growth. There is no right time as such, it just depends on your timeframe. This industry is only a decade young. If you believe cryptocurrency will see more adoption over the coming five years, then any day of the week is the right time.

With the crypto-currencies prices fluctuating continuously, especially Bitcoin, what special advice would you like to give to the potential investors?

Let’s first look at the reasons for the bitcoin price plunge recently. Firstly, all financial markets are struggling. Stocks, commodities, bonds, currencies and even gold prices are dropping. Investment managers are busy closing their positions for cash and fund redemptions due to a big drop that caused the downward spiral. That’s the reason US markets got caught in an unstoppable avalanche. It’s a crisis caused by a lack of liquidity.

Secondly, digital assets plunged. People were dumping all kinds of assets, including Bitcoin, to a point that caused a massive amount of liquidations that liquidated low leverage positions escalating the downward spiral. Even worse, Bitmex broke down. This is significant, because BitMex is used by many exchanges, market makers and trading firms to hedge their positions.

Also, many people were trading Bitcoin contracts using Bitcoin for the maintenance margin. When the Bitcoin price dropped, the value of the maintenance margin dropped, people’s position got liquidated even quicker.

Crypto’s volatility is attractive to professional traders and for those engaged in the derivatives markets, but crypto is also about developing a long term view and investing accordingly. It’s all about perspective - recently, with all the commotion happening, $100 billion dollars vanished from the crypto market as institutional investors sought to defend their positions in financial markets. Bitcoin even dropped below $5,000. Some suggested this was proof that Bitcoin was failing, but many others saw this as a great opportunity to expand their Bitcoin holdings in anticipation of the asset’s recovery and the upcoming Halvening. If anything, crypto’s volatility really trains you and almost forces you to go back and revisit the fundamentals - once you formed your view, price fluctuations won’t distract you.

With the stock prices falling fast due to the spread of Coronavirus, how do you see the impact of this scare on the cryptocurrencies?

When Bitcoin plummeted, together with stock markets, some critics were quick to point out that Bitcoin was failing as a hedge. But this is inaccurate. Bitcoin, just like gold and pretty much all other assets, do not perform well when there is global panic. Big companies in the US, including great companies such as Apple, are now greatly undervalued, and it’s no different for Bitcoin. Over the coming weeks, when the liquidity crisis is over, Bitcoin will perform well, just like gold. Over the coming months, as we see interest rates cut, and economies shaking, we will see if Bitcoin will attract more investment and recover faster than the other assets.


I personally think The coronavirus is just getting started, and the crypto market handles it surprisingly well. What do you think will happen?