The Covid-19 pandemic of 2020 is yet to be controlled and the virus has already infected thousands of people. The financial market has sustained heavy damages as both stock and cryptocurrency markets have dropped to historic lows. The notion of people flocking towards safe-haven assets has also been heavily tested over the past month, and both Gold and Bitcoin haven’t been able to perform as expected.

The Gold market is undergoing a lack of liquidity as investors trying to cash out. As of now, Gold futures have fallen 4.25% and Silver is down 8% in 24 hours in some markets. Compared to Gold, BTC is down close to 50% since January, while Gold is down 10%.

It is quite interesting to note the increasing correlation between both the assets at a time of global crisis. Both the assets started 2020 on a high note with BTC surpassing $10,000 a couple of times, and Gold hitting a yearly high of $1700. Now, these assets are sitting at 2020 lows with BTC hovering around the $5000 region and Gold at the $1500 region.

Traders have been cashing out of both the assets as many are preferring cash in the face of a Pandemic. Major Bitcoin advocates are all bullish about bitcoin being the “Gold 2.0” as it continues to correlate with Gold. On March 14, Gemini co-founder and CEO Tyler Winklevoss took to twitter to defend BTC stating:

“If bitcoin isn’t gold 2.0, then what is it? The fact that it’s not acting how you might expect only underscores just how early it is.”

Sharing similar views, Anthony Pompliano, the co-founder and partner at Morgan Creek Digital, stated that the market is acting quite similarly to that of the 2008 crisis and hence “Bitcoin and gold are doing the same thing, just as you would expect them to in a liquidity crisis..they go down.”

Victims of a ‘Liquidity Crisis’

In the latest episode of Pomp’s Off the Chain podcast, Pomp states that the market is responding to the COVID-19 pandemic and a liquidity crisis has been triggered. He said:

“A liquidity crisis means that investors all rush to the exit doors at the same time, but there are so many more sellers than buyers that investors actually have a hard time offloading their assets for cash. Quite literally, investors begin aggressively lowering the price they are willing to accept for each asset in exchange for the cash which they are desperately seeking right now.”

Pomp adds that the drop in price is not a sign of an asset being a bad store of value. Despite the sudden drop, both the assets have gained a lot in value amidst concerns regarding inflation, and debt. Recalling the 2008 crisis and how gold performed at that time, Pomp noted: