4 years ago was bitcoin's «Black Thursday»: a day of crisis and opportunity

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Key facts: Bitcoin fell from $8,000 to $4,400 in less than a day. Since then, the price of bitcoin has multiplied by more than 15 times. March 12, 2020 was marked in financial history and global collective memory as “Black Thursday” for the markets. That day, the entire world was facing the closure of its economies under the argument of containing the spread of COVID-19. The financial markets —including bitcoin (BTC)—, a mirror of society's hopes and fears, were not immune to this cataclysm. In this context of uncertainty, BTC experienced an abrupt and dramatic drop. In a matter of hours, its value plummeted, going from $8,000 to $4,400, as seen in the following TradingView chart:

Bitcoin price in March 2020. Source: TradingView. This event, far from being an isolated episode, is part of a chain of events that affected all sectors of the global market. Volatility took hold of stock markets, commodities, etc., all reeling to the rhythm of the news about the advance of the virus and containment measures.

Crisis = opportunity

If it is about bitcoin, Price drops are unique windows of opportunity. Those who know the characteristics of BTC know this well and understand that a drop in price is not an alarm signal, but rather an invitation to strengthen their positions, anticipating future appreciations.

Bitcoin is distinguished by its intrinsic scarcity, a fundamental attribute that differentiates it from fiat currencies and other cryptocurrencies. With a maximum limit of 21 million units, a limited supply is ensured, avoiding inflation due to overissue and increasing its value as demand grows. This production ceiling, encoded in its algorithm, ensures that BTC maintains a predictable and transparent monetary policy. Therefore, unlike fiat money whose purchasing power erodes over time due to inflation, bitcoin has been designed to be anti-inflationary. The rate of issuance of new bitcoins is halved approximately every four years in an event known as a «halving,» which limits new supply and favors the increase in its value in the long term. At the time of this publication, each bitcoin is trading for approximately $72,000. Those who were able to buy BTC on March 12, close to $4,400 and keep their coins until now, They have seen their price increase 16 times since then. This means that if you bought $1,000 in bitcoin that day, today—just 4 years later—you would have the equivalent of $16,000. Nothing bad. Additionally, during the COVID-19 pandemic, several countries implemented economic stimulus programs to help citizens, companies and sectors affected by the crisis. In the United States, several stimulus packages were approved that included direct checks to citizens, among other financial support measures. Those who had the opportunity to invest that “liquidity injection” in bitcoin have seen enormous capital returns. In April 2020, for example, many Americans received checks for $1,200. Assuming that someone had used that money to buy BTC in those days (at a price of approximately $8,000), today, that amount of BTC would be equivalent to $10,800 (it is worth clarifying that these calculations are not taking into account inflation itself). of the US dollar, which reduces the purchasing power of the North American currency). In other countries, governments also delivered economic aid vouchers directly to citizens. This was, for example, the case of El Salvador, where thousands of people received bonuses of 300 dollars in those days. The Bitcoin Law was not yet implemented, but, perhaps, some Salvadorans have had the possibility of investing in BTC even if it is a part of that money. If they did so and became hodlers of the digital currency, they will have seen how their purchasing power multiplied.

Lessons from “Black Thursday” 2020

“Black Thursday” in March 2020 tested the strength of bitcoin, challenging not only its market value but also the confidence of investors and enthusiasts. However, the recovery and subsequent growth not only validated its resilience, but also reaffirmed their position as an unprecedented investment opportunity. This ability to overcome crises and volatilities is not fortuitous, but is based on the unique characteristics mentioned above. These attributes not only differentiate BTC from other financial assets, but also They offer a vision of the future in which the digital currency is positioned as a safe haven against economic uncertainty and inflation.. For investors, the rise of BTC after its fall during “Black Thursday” to the record levels we see today is a testament to the potential of this financial asset. The thing is, investing in BTC is supporting a transparent, inclusive financial system that is resistant to political and economic manipulations.