In the wake of Covid-19 and the surrounding macroeconomic uncertainty, conversations are increasing around cryptocurrencies as an alternative asset class and Bitcoin as a hedging asset. By the end of the quarter, investors’ perceptions of Bitcoin and gold were more correlated than ever before, and mentions of Covid-19 surpassed those of the next Bitcoin halving in Bitcoin-related headlines.

While the halving dominated early conversations in Q1, mentions of the coronavirus in cryptocurrency publications skyrocketed in early February and significantly eclipsed publicity around Bitcoin’s halving.

Bitcoin began Q1 with a market cap dominance of 68.18% before dipping to a low of 60.97% on February 14. At the close of the quarter, Bitcoin represented 65% of the overall cryptocurrency market cap.

Bitcoin was born during the last financial crisis at a time of massive bank bailouts, inflation, and central bank intervention. Q1 2020 was dominated by coronavirus, massive government stimulus packages, and slashes to interest rates. In this time of great macroeconomic uncertainty, Bitcoin’s digital gold narrative has reached its apex.

Almost all countries have locked down owing to the outbreak of a novel coronavirus (2019-nCoV). The pandemic circumstance has already spread to the extent that it will have an adverse impact on global economy for sure and we have been highlighting this since early February. Well, the Economist Intelligence Unit revised its baseline forecast for many countries and now poses a massive risk to the global economic outlook due to this pandemic.

The macroeconomic outlook has three key tenets. First, the Covid-19 shock is unprecedented and 1H’20 global GDP is set to collapse more sharply than any time since WWII. Second, natural disaster recovery dynamics aided by unprecedented policy support set the stage for a 2H’20 growth rebound that will be far stronger than past rebounds. Third, although we expect this bounce to continue into next year, it will be partial and leave activity still depressed by end-2021. This week’s news further confirms the collapse underway in activity, while we trim our forecasts for 1H’20 growth yet again. Although we also raise our 2H’20 growth forecasts, we continue to lower the level of activity. We now forecast a 3.8% shortfall in global GDP at the end of 2021 relative to its pre-pandemic path.

China has leading the path out of this dark hole, and this week’s reports confirm its first-in/first-out status, embedded in the 1Q’20 GDP collapse -34.7% QoQ.

Today, the Australian Bureau of Statistics (ABS) released the first edition of a series documenting the impact of Covid-19 on payroll wages and employment.

Employment fell by 6.0% in the two weeks to April 4, which included a 5.5% drop over the most recent week. This is a large fall in a short amount of time.

Weak fundamentals keep us cautious in FX. Growth forecasts are still getting downgraded, even though new infections have peaked in DM.

On the flip side, the broader perspective of this pioneer cryptocurrency portrays constructive picture, referring weekly plotting of BTCUSD technical chart, from April'16, the BTC has spiked from $414 to the all-time highs of $19k, currently, trading at $ 7.4k mark, which is still 1,660% rallies. When this is the case with BTC, could we still fairly criticise the performance of the pioneer cryptocurrency?

We agree that under the circumstance of great macroeconomic uncertainty, Bitcoin’s digital gold narrative has reached its apex.

Most importantly, the open interest recorded on CME BTC futures has been considerably risen by 50% over the last month. This is positive indicator for the derivative trader as the rising open interest along with the rising price is the healthy sign in the underlying market.

Contemplating all the above factors, needless to speculate anything on the trend, and hence, the long hedges were advocated in the past as well using CME BTC Futures. It is unwise if we keep speculating on the next upside target and accumulate fresh bitcoins amid macroeconomic uncertainty.

Instead, we activated long hedges in this security at spot reference: $6,723. Levels. We, now, certainly uphold these long hedges using CME BTC contracts of May month deliveries. Courtesy: eToro & JPM