Bitcoin and the stock market crash: 694.573.873 BTC destroyed

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Bitcoin is repeatedly mentioned as a Store useful and shelter. Especially insight of the present massive price declines on the worldwide financial and stock markets, this question is of high relevance. A slightly different metric has now been published Blockfolio: within the stock exchange crash, 6 trillion US dollars were burned within the past weeks alone.

In this article, we might wish to show the relation between Bitcoin market capitalization and, therefore, the stock exchange. We also compare BTC’s performance thereupon of major indices like the DAX and Dow Jones.

 

Stock market with the darkest week since the financial crisis

Let us first take a glance at the performance of the German stock market index (DAX), also because of the Dow Jones 30 Industrial with companies like Apple, Microsoft, Goldman Sachs, Visa, Walmart, Disney than on. How did these indices perform within the face of the global fear around the coronavirus?

The picture is clear: this week the Dow Jones had the blackest (=worst) week since the financial crisis of 2007/2008, and the DAX looks similar, which has to cope with a decline of 13.7 percentage points within seven days. What may sound harsh at first, but perhaps still moderate when expressed in percentage terms, has a different direct effect when we quantify the losses in dollars (and then in BTC):

stock market

 

694,573,873 BTC destroyed in one week

The current market capitalization of the Dow Jones, for example, is 7 trillion euros. After a decline of -12.5 percent, the Dow Jones alone destroyed 1.3 trillion euros (!) in 7 days. The German share index DAX also had to record losses in the billions. Even here comes the small spoiler that Bitcoin’s market capitalization is only 142 billion euros at present. Blockfolio has now quantified the losses of all stock markets in a current tweet. The result is fascinating:

This means that 6 trillion US dollars were ‘burned’ within the last seven days. Of course, we are only talking about fictitious values here, because ultimately the present market capitalization is usually calculated from the previous price offered * number of shares. The figures are nevertheless gigantic. If we express them in Bitcoin, we will quickly see that BTC may be a ‘drop within the ocean’ compared to the American or global stock exchange. In BTC terms, the worldwide stock exchange would have destroyed 694,573,873 Bitcoin in one week!

 

Bitcoin would are a mid-sized company within the Dow Jones

Of course, we must note that the total number of Bitcoin is restricted to 21,000,000 BTC. Thus, the above figure is only a (fictitious) comparison. Nevertheless, it’s fascinating to imagine that in one week 33 times (!), the utmost amount of BTC was destroyed. From this attitude, we should always realize that Bitcoin, with its market capitalization and daily trading volume, still has some room for improvement.

In such scenarios, we will undergo some number of games: for instance, we will run the script of hyper-Bitcoinization. The American companies listed on the stock exchange alone have a complete market capitalization of 30 trillion dollars. If BTC were to assume such a market capitalization within the future, we might have prices of just about USD 1.5 million per BTC. Albeit we compare Bitcoin – in its current state – with companies from the Dow Jones, Bitcoin would be just a medium-sized company. Therefore the market cap of BTC is about an equivalent level as that of McDonalds or Boeing.

Bitcoin price with similar performance to DAX or Dow Jones
Last but not least, let’s take a glance at the Bitcoin course. How has it developed over the past week, and is BTC hooked into macroeconomic factors during this respect? – the solution is often found by watching the Bitcoin price chart:

Bitcoin Chart

The price of 1 BTC has also fallen within the last seven days. Interestingly, these are almost on an equivalent level as those of the DAX or Dow Jones. Specifically, the worth of 1 Bitcoin fell from USD 9,600 to USD 8,650, a drop of ~10%.

In the past, BTC has proven to be a secure haven in specific ‘local’ crises. I’m thinking of Venezuela, Argentina, Turkey, or maybe the protests in Hong Kong. However, from a macroeconomic point of view, if the economy is heading for recession – or a minimum of a pointy correction – Bitcoin (as we are currently seeing) also will be dragged into the downward spiral.

 

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