Coronavirus Strips Bitcoin of ‘Digital Gold’ Status
There was always a vague argument that the Bitcoin was a digital gold that was inversely correlated with the stock market.
However, it’s coronavirus 1, Bitcoin 0. Digital gold? Not so much. We can say in March, 2020 at least Bitcoin is not a safe haven.
A retreat into gold has occurred, a flight from stocks and bonds. But it’s not just stocks that are getting hammered. The cryptocurrency market saw a huge sell-off in the past 24 hours. Bitcoin holds up the entire cryptocurrency plight, and its drop is a drop for everyone.
Bitcoin was down 48% from 24 hours before, at 10:24 a.m. Singapore time, at $4,001.60. It’s up barely to $5,056, about as anemic as the Friday recovery on the stock market.
The case for Bitcoin as the digital gold is over. The verdict is that it’s not a safe asset where we haven’t seen this kind of volatility in years.
Bitcoin’s price was $9,000 at the start of March. With a liquidity crisis coming for businesses, SMBs, corporate debt, banks and the retail sector, crypto just doesn’t seem like a safe bet. Or does that dip make it too a buying opportunity?
On the 5th worst day of the stock market in history this week, Bitcoin itself dropped 28.35%, marking the largest single-day loss since December 2013. That’s not a good sign for Bitcoin’s future. It lost more than $93 Billion in market cap.
Why Did Bitcoin’s Price Drop?
Investors are concerned about the global economic fallout from the coronavirus as businesses are disrupted and cities are locked down. Usually when sentiment overtakes market norms, Bitcoin does well – but not this time.
Bitcoin is not a safe haven and is not immune to panic. Bitcoin tanked 50% in just 2 days amid coronavirus market panic and it shows how vulnerable and volatile the cryptocurrency market is.
- The Bloomberg Galaxy Crypto Index fell as much as 49%, hitting a historic low.
- Bitcoin’s epic fall comes as markets also reel over the coronavirus pandemic.
- Over the past few years, bitcoin has been likened to “digital gold” and has been seen by some as a safe haven asset to park money when markets are facing turmoil.
- The case for Bitcoin as either a digital gold or a safe haven has to be re-assessed after this drop.
Bitcoin can’t save the world from a virus, and has behaved with less stability than either gold, fiat currencies or stocks. That’s a stamp of doubt on the chosen-crypto with limited upside in the fear factor gripping the world.
The price action of that day (Thursday) means Bitcoin’s 2020 gains are completely wiped out. Cue the negative CNBC articles on Bitcoin and Cointelegraph’s spamming.
If you invest in crypto, you might have to rethink your position in 2020.