Over the past two years, what changes has the cryptocurrency market undergone due to the pandemic? Let the CEO of the quantitative institution Alameda help you sort it out!

The CEO of well-known trading firm Alameda Research, Sam Trabucco, today shared his observations on the market during the past two years of the pandemic on Twitter. Despite the continued prevalence of pandemic-related news in daily life, the crypto market seems to have gradually adapted and become more "efficient."

It's been a weird few days in the markets — both crypto and non-crypto alike. But honestly, it's all starting to feel a little familiar …

A thread about efficiency. pic.twitter.com/KJ9B7EMnMO

— Sam Trabucco (@AlamedaTrabucco) November 30, 2021

Impact on the Market During the Pandemic

Sam Trabucco begins with the context from March 12th last year when the COVID pandemic was rapidly spreading worldwide, causing significant disruptions in people's lives and leading to a sharp decline in stock markets. The cryptocurrency market was also severely affected, experiencing even greater losses due to cascading liquidations in the futures market.

In the following months, as the stock market gradually recovered, it also positively impacted the cryptocurrency market.

Sam Trabucco believes that to some extent, this rise is reasonable. Despite the global pandemic, markets always find ways to promote economic growth. Additionally, due to the prolonged lockdowns that left people with nowhere to spend, many individuals turned to meme coins like Dogecoin in the subsequent months.

However, the pandemic did not disappear as markets began to recover. Ongoing news related to COVID continued to impact markets in different directions. In May of this year, the emergence of the Delta variant led to a 5% drop in the S&P 500 index. The cryptocurrency market also experienced significant declines but gradually recovered over the following months.

Just last week, a similar event occurred with the spread of the new South African variant, Omicron. The market reacted swiftly, with Bitcoin experiencing an almost 10% drop within a few hours.

Sam Trabucco noted that in the face of these familiar events, Bitcoin is considered a riskier asset and typically triggers price declines. Due to the impact of cascading liquidations in the futures market, the beta value is greater than 1, indicating larger fluctuations than the overall market.

However, markets learn from experience, and it is well-known that markets rebound once negative news is digested. After the market crash caused by COVID, it took Bitcoin six months to return to its pre-decline price, whereas after the Delta variant, it only took two months.

And what about Omicron? Of course, there will be a rebound, but this time it took even less time, less than four days.

Regarding the effectiveness of existing vaccines against Omicron, which is not as effective, the downturn is even less, and the recovery period is shorter.

Markets Gradually Becoming More Efficient through Learning

Sam Trabucco believes that scenarios leading to market declines will not persist, and the recovery period will continue to shorten until seemingly having no impact. When Bitcoin is no longer affected by such events, it can be considered an "efficient market." If future rebounds are 100% predictable, any time the market falls due to pandemic effects would be meaningless and only make the market less efficient.

As time goes on and more traders understand the impact of such news, the market naturally becomes more efficient. Early recognition of these types of trades is more critical now than ever before.

Finally, Sam Trabucco suggests that an excellent trader needs to understand what is currently happening and react accordingly. To further advance, understanding how others will react to situations and responding to their behavior is crucial.