Introduction
March 11, 2020, marked a turning point in the financial world as the market experienced an unprecedented crash, forever known as the "Black Thursday" event. This article delves into the events of that fateful day, reflecting on its causes, impact, and subsequent recovery.
The Black Swan Event: A Day of Turmoil
March 11, 2020, will forever be etched in financial history as a black swan event, characterized by its unforeseen and profoundly adverse consequences. The crash was triggered by the escalating instability caused by the Covid-19 pandemic, which led to the World Health Organization (WHO) declaring it a global pandemic on that very day.
Financial Markets in Disarray
The repercussions of the black swan event were felt across various sectors of the global economy. The U.S. equity markets, including the Dow Jones, S&P 500, and Nasdaq Composite, experienced their most significant single-day declines since the infamous "Black Monday" in 1987. Wall Street even witnessed a momentary trading halt of 15 minutes, triggered by the mandated circuit-breaker threshold.
Global Market Declines
The impact of Black Thursday was not limited to the U.S. markets alone. In the subsequent days, global markets witnessed significant declines, reaching a critical juncture on March 16, 2020, when worldwide markets collectively plummeted by approximately 13%. Precious metals, oil prices, and the cryptocurrency market also experienced sharp declines in valuations.
The Bitcoin Plunge
Bitcoin, the leading cryptocurrency, was not spared from the market crash. On March 10, 2020, the closing price of bitcoin stood at $7,886 per coin, only to plummet to a low of $3,867 per unit on Black Thursday. The entire crypto market economy hovered just above $140 billion, a stark contrast to its current valuation of $1.27 trillion. However, the low price of bitcoin proved to be short-lived.
The Road to Recovery
Despite the initial plunge, bitcoin rebounded the very next day, surpassing the $5,000 mark. By the end of March, it closed at $6,410, signaling a swift recovery. Other global financial assets, including precious metals, stocks, and commodities, also showed signs of recovery by April 2020. This revival was driven by factors such as the anticipation of a gradual return to normalcy following the pandemic and unprecedented government stimulus measures.
Unprecedented Government Stimulus
The unparalleled government stimulus measures implemented in the wake of the pandemic played a crucial role in the recovery of various financial markets. These measures led to a surge in the real estate market, a meteoric rise in crypto assets, and an upswing in the stock market. The injection of stimulus funds created a bubble in virtually every sector, propelling bitcoin to achieve a lifetime high of $69,000 per unit in November 2021, with the total value of the crypto economy surpassing $3 trillion.
The Current Landscape
However, since then, government stimulus programs have concluded, and central banks, including the Federal Reserve, have implemented monetary tightening policies. This has resulted in an increase in interest rates and a prolonged crypto winter. Stock markets have also encountered setbacks following their 2021 peaks, and a substantial segment of global markets has witnessed deflationary trends. Despite these challenges, bitcoin and other cryptocurrencies have mounted a remarkable resurgence, while the precious metal gold has been nearing its historical high.
The Lingering Shadow
Despite the recovery, the possibility of another black swan event looms over the financial markets. The current global tensions, market volatility, and the reverberations of significant stimulus efforts, wars, and conflicts, and the specter of inflation contribute to a sense of unease. While the likelihood of a massive black swan event occurring remains statistically less likely, the uncertainty surrounding the future cannot be underestimated.
Conclusion
The market crash of March 11, 2020, known as Black Thursday, left an indelible mark on the financial world. It was a black swan event triggered by the Covid-19 pandemic, causing significant disruptions across global markets. However, the subsequent recovery, fueled by government stimulus measures, has paved the way for a resurgence in various financial assets. As we navigate the ever-evolving landscape of the global economy, it is essential to remain vigilant and prepared for potential future challenges.
What are your thoughts on the market crash of March 11, 2020? Share your opinions in the comments section below.
Frequently Asked Questions
What are the pros & con's of a golden IRA?
The main advantage of an Individual Retirement Account (IRA) over a regular savings account is that you don't have to pay taxes on any interest earned. An IRA is a great option for those who want to save money, but don't want tax on any interest earned. However, there are disadvantages to this type investment.
To give an example, if your IRA is withdrawn too often, you can lose all your accumulated funds. Also, the IRS may not allow you to make withdrawals from your IRA until you're 59 1/2 years old. If you do decide to withdraw funds from your IRA, you'll likely need to pay a penalty fee.
A disadvantage to managing your IRA is the fact that fees must be paid. Many banks charge between 0.5%-2.0% per year. Other providers charge monthly management fees ranging from $10 to $50.
If you prefer your money to be kept out of a bank, then you will need insurance. Insurance companies will usually require that you have at least $500,000. You might be required to buy insurance that covers losses up to $500,000.
If you choose to have a gold IRA you will need to establish how much gold to use. Some providers limit the number of ounces of gold that you can own. Others let you choose your weight.
You'll also need to decide whether to buy physical gold or futures contracts. Gold futures contracts are more expensive than physical gold. Futures contracts, however, allow for greater flexibility in buying gold. You can set up futures contracts with a fixed expiration date.
It is also important to choose the type of insurance coverage that you need. Standard policies don't cover theft protection, loss due to fire, flood or earthquake. It does provide coverage for damage from natural disasters, however. You might consider purchasing additional coverage if your area is at high risk.
Insurance is not enough. You also need to think about the cost of gold storage. Storage costs are not covered by insurance. Banks charge between $25 and $40 per month for safekeeping.
To open a IRA in gold, you will need to first speak with a qualified custodian. A custodian helps you keep track of your investments, and ensures compliance with federal regulations. Custodians aren't allowed to sell your assets. Instead, they must retain them for as long and as you require.
After you've determined which type of IRA is best for you, fill out the paperwork indicating your goals. You should also include information about your desired investments, such as stocks or bonds, mutual funds, real estate, and mutual funds. You should also specify how much you want to invest each month.
After filling in the forms, please send them to the provider. The company will review your application and send you a confirmation letter.
Consider consulting a financial advisor when opening a golden IRA. Financial planners have extensive knowledge in investing and can help determine the best type of IRA to suit your needs. They can help you find cheaper insurance options to lower your costs.
What's the advantage of a Gold IRA?
The benefits of a gold IRA are many. It's an investment vehicle that lets you diversify your portfolio. You control how much money goes into each account and when it's withdrawn.
You can also rollover funds from other retirement accounts to a gold IRA. This makes for an easy transition if you decide to retire early.
The best part is that you don't need special skills to invest in gold IRAs. They are readily available at most banks and brokerages. Withdrawals can happen automatically, without any fees or penalties.
There are, however, some drawbacks. Gold is known for being volatile in the past. So it's essential to understand why you're investing in gold. Are you looking for growth or safety? Do you want to use it as an insurance strategy or for long-term growth? Only when you are clear about the facts will you be able take an informed decision.
If you want to keep your gold IRA open for life, you might consider purchasing more than one ounce. You won't need to buy more than one ounce of gold to cover all your needs. You could need several ounces depending on what you plan to do with your gold.
A small amount is sufficient if you plan to sell your gold. You can even live with just one ounce. However, you will not be able buy any other items with those funds.
How is gold taxed within an IRA?
The tax on the sale of gold is based on its fair market value when sold. You don't have tax to pay when you buy or sell gold. It is not income. If you decide to sell it later, there will be a taxable gain if its price rises.
Loans can be secured with gold. Lenders will seek the highest return on your assets when you borrow against them. This often means selling gold. However, there is no guarantee that the lender would do this. They might keep it. Or, they may decide to resell the item themselves. You lose potential profits in either case.
So to avoid losing money, you should only lend against your gold if you plan to use it as collateral. It's better to keep it alone.
Statistics
- Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (aarp.org)
- Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (aarp.org)
- (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)
- The price of gold jumped 131 percent from late 2007 to September 2011, when it hit a high of $1,921 an ounce, according to the World Gold Council. (aarp.org)
- Instead, the economy improved, stocks rebounded, and gold plunged, losing 28 percent of its value in 2013. (aarp.org)
External Links
wsj.com
- Saddam Hussein's Invasion Helped Uncage a Bear In 1990 – WSJ
- Do you want to keep your IRA gold at home? It's Not Exactly Legal – WSJ
law.cornell.edu
- 7 U.S. Code SS7 – Designation board of trade as contract marketplaces
- 26 U.S. Code SS 408 – Individual retirement funds
investopedia.com
finance.yahoo.com
How To
The History of Gold as an Asset
From the beginning of history, gold was a popular currency. It was universally accepted due to its purity and divisibility, beauty, scarcity, and durability. Due to its value, it was also internationally traded. Because there were no internationally recognized standards for measuring and weighing gold, the different weights of this metal could be used worldwide. One pound sterling, for example, was equivalent in England to 24 carats, and one livre tournois, in France, to 25 carats. A mark, on the other hand, was equivalent in Germany to 28 carats.
The United States started issuing American coins in the 1860s made of 90% copper and 10% zinc. This led to a decline in demand for foreign currencies, which caused their price to increase. The United States began minting large quantities gold coins at this time, which led to a drop in the price. The U.S. government was unable to pay its debts due to too much money being in circulation. To do this, they decided that some of their excess gold would be sold back to Europe.
Many European countries began accepting gold in exchange for the dollar because they did not trust it. However, many European nations stopped using gold to pay after World War I and started using paper currency instead. The price of gold rose significantly over the years. Even though the price fluctuates, gold is still one of best investments.
—————————————————————————————————————————————————————————————–
By: Jamie Redman
Title: The Black Thursday Market Crash of 2020: A Retrospective Analysis
Sourced From: news.bitcoin.com/bitcoins-black-swan-a-retrospective-on-2020s-black-thursday/
Published Date: Mon, 30 Oct 2023 16:30:52 +0000
Leave a Reply