The outbreak and spreading of COVID-19 globally has not only brought impact on people’s normal lives, but also caused market concerns that the global economy may enter a recession. The global financial market is turbulent, and the stock market’s roller-coaster rise and fall have been repeated, which has caused the author to ponder upon the traditional stock mechanism. If technology is applied to give the stock multiple attributes, such as digitizing traditional stocks through technical means to enable it to be traded and consumed, can elevated liquidity effectively counteract market shocks?
Stock circuit breaker triggered sparks panic, the Federal Reserve bailouts urgently
Since March, due to the impact of COVID-19, the financial market has been turbulent, while the stock market has been performing dramatically. US stocks have ended a bull market for ten years, triggering four stock circuit breakers in the past half month. Global stock markets have fallen and caused a circuit breaker tide. On March 23, the three major U.S. index futures triggered circuit breakers one after another, and then the South Korean, Indian, Indonesian, and Thai stock markets opened or crashed and triggered circuit breakers quickly. For nearly half a month, the epic slump in U.S. stock market has triggered collective panic in the global financial markets. The global stock market has plummeted. In order to appease the panic, ease liquidity shortages and market financing conditions, central banks in various countries have launched bailout plans.
As the global central banks’ weathervane, the Federal Reserve has frequent movements to save the market. On March 3 and March 15, the Federal Reserve cut interest rates twice before the original interest rate meeting. At present, the target rate of the federal funds has fallen to 0-0.25%, returning to the “zero interest rate” era. On March 15, the Federal Reserve also launched a $ 700 billion QE program and reduced the reserve requirement ratio for thousands of banks to zero. However, the two actions of supporting the market did not achieve the expected results. In order to prevent the liquidity from drying up, the Federal Reserve directly offered a concession and launched the “Neptune style” market support, and announced the opening of unlimited QE on the evening of March 23.
However, the market did not immediately respond to the “rocket” movement of the Federal Reserve. On the same day (March 23), US stocks still plummeted. At the close, the Dow sank by 3.04%, the Nasdaq plunged by 0.27%, and the S & P fell 2.93. %. But overnight (March 24), the global stock market, after plummeted for more than half a month, bounced back. Korean stocks obtained the largest single-day gain in the past 11 years. The index futures triggered circuit breaker because of the excessive increase; A-shares and Hong Kong stocks also rebounded again, and North bound re-attacked A-shares. The German stock market rose more than 6% shortly after the market opened; the US stock market index futures also began to soar. The three major stock indexes rose more than 5%, triggering a circuit breaker. The Dow has the largest single-day rise in history, creating the largest increase in 87 years.
Short-term retaliatory rebound,unpredictable turning point of the stock market
From a slump triggering a circuit breaker to an epic surge, this time’s industry resurgence is as exciting as a roller coaster ride. Although this round of upswing will alleviate the panic caused by the previous plunge in a short time, but does the retaliatory rebound in exchange for the bailouts of multiple countries really mean that the turning point of global stock markets has come? At present, the coronavirus is still spreading. It is unclear how much impact it will have on the global economy in the future. The International Monetary Fund (IMF) has pointed out that the new coronavirus epidemic will cause the global economy to fall into recession in 2020, even more severe than the recession triggered by the global financial crisis in 2009.
The global impact of the 2008 economic crisis does not need to be reiterated. The author believes that the urgent actions of countries to inject liquidity into the market in the short term can indeed slow down the pace of economic entry into the recession, but it cannot fundamentally resolve the economic shock caused by the epidemic. According to Reuter’s news on March 24, a WHO spokesman said that 85% of COVID-19 cases reported in the past 24 hours came from Europe and the United States. The number of confirmed cases of COVID-19 in the United States is rapidly increasing and may become a global new COVID-19 “epicenter”. On March 25, due to the suspension of a new round of stimulus bills, U.S. stocks late fell and barely closed up. This round of bumpy ride of the stock market has made investors nervous again. If the U.S. coronavirus cannot be controlled well in a short period of time, and if the stimulus bill cannot be passed for a short period of time, will it trigger another US stock market shock? Whether the global economy will be affected remains uncertain.
Digital stocks may start the era of stock 2.0
When the bull market comes, there will always be some people who miss the chance to strike it rich overnight; when the bear market comes down, some people can lose every single penny for not getting out in time. This happens because the capital market is inherently unpredictable, and also because the trading time of traditional stock markets is limited, investors cannot operate in real time. Therefore the best trading time will be missed. Under the market turmoil, what would happen if there is a super stock that can be traded 24/7, not only can be bought and sold, but also adopts currency function for consumption? Coincidentally, the author recently discovered SuperStock, a platform that can provide digital stock services. According to official information, SuperStock can effectively help listed companies upgrade their stocks into ecological currencies that can be paid within the business system of listed companies and can achieve 7 * 24 hours of super-stock trading.
Whether it is called digital stocks or super stocks, this is a disruptive innovation. The era of stock 2.0 is coming. Any innovation is definitely inseparable from the drive of technology, and digital stocks are no exception. How do stocks realize digitalization and round-the-clock trading? Here we have to mention the current blockchain technology. Let’s take a look at how SuperStock mentioned earlier helps listed companies realize digitalization of stocks. According to official information, SuperStock provides blockchain digitization services for listed companies that require digitalization of stocks through blockchain technology. Specifically, it refers to the stocks of listed companies or unicorns. The corresponding digital stock is generated through the blockchain technology at theanchoring of 1: 1, and the digital stock can represent the corresponding stock. As a result, holders of digital stocks can enjoy the corresponding stocks and the rights and interests represented by the stocks, including all rights of income, dividends, and voting. In addition, digital stocks also incorporate payment attribute, which can be used as the ecological currency in the business system of listed companies. Payments can be made within the products and services of the listed company and can be used online and offline.
In the field of blockchain, 24/7 trading is not new, but it is an insurmountable gap for the traditional stock market where no trading operations can be performed after the close. Different regions have different trading time. Investors need to open different accounts. Lack of understanding of the local market will become factors that affect investor decisions. As for companies, if the general environment is not good, the market value will quickly evaporate, and digital stocks can effective address these pain points. Taking the payment attributes of stocks given by SuperStock, suppose that Coca-Cola’s stocks need to be digitized. After the corresponding digital stocks are generated by 1: 1 anchoring, Coca-Cola’s stocks can be used to pay for Coca-Cola cokes. It can also be used as its ecological currency and freely circulate in its business, so that investors can quickly switch asset types according to their own needs; for enterprises, their stocks can be fully circulated in the capital market and consumption scenarios. Consumers and investors’ price sensitivity will also affect stock liquidity. In this way, the market value of the company will be linked with its own business capabilities, which can effectively combat market fluctuations. In other words, the company’s revenue is directly converted into capital to fight against stock prices including malicious acquisitions. Similarly, when the business is sluggish, pricing can be used to directly stimulate the consumption scenario and directly convert capital into performance.
At present, the global market is integrated, and the stock market, as the core of the capital market, directly affects the development of the global economy. Under the influence of the coronavirus, the turbulence of traditional financial and stock markets has also sounded the alarm for us. The market desperately needs a new force that can counteract volatility. Digital stocks, as a new financial model, have both traditional stock and currency investment & payment attributes. The perfect integration of the two can not only hedge the risk of direct investment in crypto currency prices, but also provide new potential sources of funds for enterprises. In other words, through the application of blockchain technology, digital stocks, while reducing the threshold for user participation, will also increase the global liquidity of listed company stocks. It may become a new pattern and new form of the financial industry and subvert the operating logic of the capital market.