The first half of 2020 has been wild for just about everyone in every asset class. In early March, when it became evident that COVID-19 was a seismic event, asset markets across the globe crashed. One important reason was that levered investors suddenly received margin calls and were forced to liquidate assets to satisfy them.
When the only thing anybody cares about is cash, there is no such thing as a safe asset or a defensive investment. During the crash, companies rushed to access their revolving credit lines, bolstering cash reserves as quickly as possible in fear that if they didn’t do it today, that credit would be unavailable tomorrow. The bid for risk securities dropped out, and prices started to plummet. Bitcoin (BTC) and other cryptocurrencies were no different than stocks — simply another asset investors were holding that they needed to sell in order to raise United States dollars.
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