The past few days have been disastrous for the crypto markets. After losing support at the $9,500 level, bitcoin (BTC) careened below $9,000 today. This plunge in bitcoin price pours cold water on the narrative that the OG crypto acts as a safe haven in times of global calamities like the Coronavirus which has whipsawed the markets.
The top coin has dumped circa 12 percent in the space of two weeks, in lockstep with the crash in the stock markets. This suggests that this time, bitcoin has soundly rejected the safe-haven status.
Bitcoin Drops Below $9,000 As Coronavirus Fears Put A Damper On Global Markets
The Coronavirus is now spreading to other countries beyond China. Health officials recently confirmed multiple cases in Italy, South Korea, the US, and Japan. The petrifying spread of the coronavirus prompted a huge sell-off in the traditional markets as investors turned to risk-off assets like gold.
In particular, the Dow Jones tanked by an eye-popping 900 points yesterday, on the heels of another devastating crash that was witnessed on Monday. In the midst of all this Coronavirus chaos, gold skyrocketed to a seven-year high just two days ago.
Bitcoin, which is often referred to as digital gold, has not behaved like the yellow metal. The top crypto has instead succumbed to selling pressure and dumped alongside risk-on assets like the aforementioned US stocks. At the time of writing, bitcoin has lost 6.14 percent over the last 24 hours and is hovering around $8,748.49.
The drop to three-week lows has raised doubts about bitcoin acting as a safe haven asset.
Is Bitcoin Really A Safe-Haven Asset?
Bitcoin has always worked perfectly as a store of value but proof of it being an ideal safe haven has always been a hit or miss.
As the trade tensions between the United States and China escalated in May last year, bitcoin surged while the Chinese Yuan devalued. The tit-for-tat tariffs that the two superpowers imposed on each other further lit the fire under the bulls.
Additionally, the demand for bitcoin increased as protests in Hong Kong intensified late last year.
More recently, the United States admitted to killing the Iranian top general, Qasem Soleimani, in an airstrike in Baghdad. The Iranian government later reiterated by firing missiles in two Iraq bases that were hosting US troops. As many anticipated that these US-Iran tensions would worsen, bitcoin rallied to $8,500.
Nonetheless, it appears that bitcoin is showing its true colors as a risk-on asset with the coronavirus crisis. The crypto-asset has continued slumping despite many expecting investors to use it as a hedge against the fast-spreading coronavirus that is threatening to cripple the global economy.
Yet, during a recent interview with CNN’s Julia Chatterley, Morgan Creek’s Anthony Pompliano noted that bitcoin is acting exactly how it was designed to: as a non-correlated asset. He explained that during times of global uncertainties like the coronavirus stocks, bonds, and gold do what investors expect them to do. Bitcoin, on the other hand, does not do that. Thus, the fact that it has not surged when stock markets are dropping indicates that it is a non-correlated asset.
After breaking below $9,000, the next levels of support are at $8,700 and $8,300. However, a move above $9,400 would restore the bullish case.