Analysis of the Digital Money Market under the Global Financial Crisis

The current economic crisis is different from those in the past. Previous financial crises typically stemmed from purely economic issues that could be resolved through economic measures such as lowering interest rates or printing money. However, the root of this crisis lies not only in the economic realm but also involves multiple aspects such as public health, which makes traditional response measures less effective.

The characteristics of the COVID-19 virus make it a highly challenging problem. It has a long incubation period, strong infectivity, and high mortality rate, which makes it a difficult threat to control. The responses from governments and financial institutions have also triggered market unease and doubts.

The measures taken by the US government and the Federal Reserve have raised concerns in the market. The Federal Reserve has lowered interest rates to nearly zero, which is akin to exhausting all medications at once, further exacerbating the panic in the market.

In this context, Bitcoin's performance prompts a reevaluation of its positioning as a safe-haven asset. In fact, during the recent market turbulence, Bitcoin's performance has resembled that of a risk asset rather than a safe-haven tool. It has shown a higher correlation with risk assets such as crude oil and stock indices, while exhibiting a lower correlation with traditional safe-haven assets like gold.

People regard Bitcoin as a safe-haven asset mainly for two reasons: first, compared to fiat currencies that can be issued in unlimited quantities, the total supply of Bitcoin is fixed, which theoretically can counteract inflation; second, Bitcoin is easy to store and transfer, which may provide an advantage over traditional assets during special periods. However, these characteristics are not enough to make Bitcoin a true safe-haven asset.

It is noteworthy that during this financial crisis, the stablecoin USDT has performed outstandingly. Since October of last year, the price of USDT has increased by about 20%, while other major cryptocurrencies have experienced varying degrees of decline. This phenomenon reflects that, in the context of increasing market uncertainty, investors are more inclined to choose stablecoins pegged to fiat currencies as a hedging tool.

As the largest stablecoin by market share, USDT's development strategy is worth noting. Currently, the ERC20 version of USDT accounts for 61.35% of the total market capitalization, indicating a trend towards aligning with the Ethereum ecosystem. Although the issues of USDT's issuance and audits have been controversial, as long as there is no excessive issuance, its value can remain relatively stable.

For investors, the current financial crisis presents both challenges and opportunities. When investing in Bitcoin, it is necessary to change the mindset and view it as a risk asset rather than a safe-haven tool. Whether adopting a value investment strategy or speculative trading, it is essential to fully recognize the high risk of the market.

Economic crises often present rare opportunities for ordinary people to achieve social mobility. In the face of current financial turmoil, investors should remain rational, make prudent decisions, and also recognize that this may be a once-in-a-lifetime investment opportunity.