On March fourteen, Tyler Winklevoss, the co-founder and CEO of Gemini and prominent early Bitcoin investor, took to Twitter to defend Bitcoin despite the recent market crash.

In the tweet, Tyler emphasizes that Bitcoin is even so in its infancy, stating:

"If bitcoin isn't gold 2.0, then what is it? The fact that information technology'southward not acting how you might expect but underscores just how early on information technology is."

Supporting Winklevoss' exclamation, Anthony Pompliano, the co-founder and partner at Morgan Creek Digital, has attributed the recent crypto market place meltdown to a broader liquidity crisis coursing through the global economy. He said:

"Bitcoin and aureate are doing the same matter, just as you would await them to in a liquidity crisis..they become down. Same thing happened to gold during liquidity crunch of 2008 besides."

As in 2008, the metals markets have suffered enormous losses equally a result of the electric current liquidity crisis, with gold futures falling 4.25% and silver futures crashing 8% in a single day on India'due south markets. Over the by calendar week, golden is down nigh 10% compared to Bitcoin's (BTC) l% while condign increasingly correlated since January.

Bitcoin-gold realized correlation

Bitcoin-gilded realized correlation. Source: Skew

Liquidity crunch drives marketplace collapse

In a recent episode of his Off the Chain podcast, Pomp argues that the shutting down of economic activity in response to the COVID-xix coronavirus pandemic has sparked a liquidity crisis — driving down the prices of Bitcoin and gold despite their condition as a safe-haven asset.

"A liquidity crisis means that investors all rush to the go out doors at the same fourth dimension, but there are so many more sellers than buyers that investors actually take a difficult time offloading their assets for cash. Quite literally, investors begin aggressively lowering the cost they are willing to accept for each asset in exchange for the cash which they are desperately seeking right at present."

Pomp points to the thirty% crash in the cost of aureate during the 2008 global financial crisis, stating: "This [wasn't] considering gold is a bad store of value or that it had lost prophylactic-haven status subsequently five,000 years. It [was] because gilded has a liquid market and investors needed liquidity over anything else."

Despite gold's sudden drib in price, the Morgan Creek Digital co-founder notes that the price of gold most tripled in five years from $650 in 2006 to more than $one,800 in 2022 equally concerns regarding U.S. monetary policy, inflation, and debt increasingly gripped the markets.

"Simply, gold served equally a store of value and safe-haven asset over the full timeline of the crisis, simply it succumbed to the liquidity crisis during the worst 6 months. This is what I believe is happening to Bitcoin right at present."

Tin crypto recover from a liquidity crisis?

Pomp asserts that most investors who were belongings Bitcoin for cash probable sold over the last week — driving the huge losses recently sustained across the crypto markets.

While hesitating to "guarantee" that BTC will not meet deeper local price lows, Pomp speculates that most investors who are nonetheless holding Bitcoin are "holders of last resort" who will not sell their BTC.

"Regardless of toll movements in the USD commutation value, the holders of concluding resort won't sell their Bitcoin. They are potent easily. They tin't be shaken out of their belief. In fact, they are likely to be buying Bitcoin on these large price drops, rather than selling. They are exchanging USD for Bitcoin right now."

Further, Pompliano expects that the upcoming halving will coincide with the introduction of monetary stimulus measures and may further drive an influx of investors seeking prophylactic-haven exposure.

Predicting interest charge per unit cuts and quantitative easing, Pomp expects that investors will soon seek to weather the liquidity crisis by seeking exposure to "sound money" and "safe-haven avails," adding:

"Both gold and Bitcoin should do incredibly well during this time flow."