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- The coronavirus outbreak has inspired some hark kicks to Bitcoin’s price, with the world’s largest cryptocurrency falling over 20% in a few weeks.
- Bitcoin has a long-standing status as a safe haven asset that has been touted for by many cryptocurrency and financial analysts.
- BTC is a safe haven asset that brings back the fundamentals of asset trading to the market, according to Michael Conn, the founder of Quail Creek Ventures.
Bitcoin has a long-standing status as a safe haven asset that has been touted for by may cryptocurrency and financial analysts but has also been equally denied by many others.
This position is seriously falling into question for the cryptocurrency as it has failed to protect assets during market downturns and shows more relation to high-risk assets like stocks and derivatives. The coronavirus outbreak has inspired some hark kicks to Bitcoin’s price, with the world’s largest cryptocurrency falling over 20% in a few weeks.
As the global panic over the SARS-related virus grows, the entire financial market has been taking a strong hit with the Dow Jones Industrial Average falling over 2,000 points yesterday, one of the largest drops the benchmark index has seen. But Bitcoin’s price trend during this time of market turmoil brings to question whether the cryptocurrency really is the safe-haven asset than many give it credit for.
Cryptocurrency investing has been known to be a mixed bag of treats: with the right choices and the right investments, people have made remarkable profits, and with bad decisions, one can also lose their entire investment.
And to add to this, the entire cryptocurrency market is also highly volatile, and this can, therefore, result in prices changing massively from one second to the next, and investors can make massive gains or even lose their entire investment.
Upon taking further opinion from market analysts on the relation between Bitcoin’s recent movements and that of high-risk assets, the outstanding idea was that it was a lack of liquidity in stocks causing liquidity issues in digital currencies, therefore, resulting in losses in both markets.
This would make sense that most investors might be trading stocks and cryptocurrencies, and the drop in the stock market resulted in losses for traders. Thus translating to lesser fund flow into cryptocurrency investments, bringing forth the plague of the downturn to crypto as well.
BTC is a safe haven asset that brings back the fundamentals of asset trading to the market, according to Michael Conn, the founder of Quail Creek Ventures. Denis Vinokourov, the research head at digital asset firm Bequant, stated that a liquidity obstacle in some markets translates highly into other markets as well, resulting in traders having to make changes to their portfolios while dealing with margin calls.
Crypto assets are unlikely to be seen as a priority during this period, too, resulting in worsened conditions. As even further expert opinion seems to indicate, the entire coronavirus impact on the cryptocurrency market is largely due to a suspected liquidity crunch that came in from the stock market.
Bitcoin dropped from a local high of $10,000 a few weeks ago to its current trading value of $7,939 in just a matter of 2 weeks as the virus panic grew, and the entire financial market began to show the declining value and numbers never seen before since the 2008 financial crisis. Many expect Bitcoin to pick back up soon and begin bullish trends, but it is yet to be seen what trajectory the famed cryptocurrency will take.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
