Bitcoin once tagged as a ‘safe haven’ asset, recently proved bookmakers wrong again.Bitcoin started its fall over the weekend and by the early hours of Monday it dropped by -12% or $1,100. At its current price of 7,833.5 5.30pm Nigerian local time, bitcoin seems attractive to buy .However, investor bias was broken with heightened uncertainty in global economic outlook.
For these reasons, we can expect that the current bounce towards $7,900 might be a temporary relief on the way down.
The other altcoins like Ethereum ,XRP , Cardano ,Monero took the same deep fall as Bitcoin. Since Saturday night, the total capitalization of the cryptocurrencies as plummeted by $36billion, or down at almost -14%.
However the sudden drop comes after months of stable price growth, which saw the Bitcoin rise from below $7,000 at the start of the year to above $10,000 by late February.
Some analysts attributed bitcoin’s price rise to geopolitical tensions at the start of 2020, compounded by the coronavirus outbreak .
The latest crash appears to dispel this narrative, as it coincided with the sharpest rise in coronavirus-related deaths since the outbreak began.
The dramatic loss in value mirrored the drop in stocks as well as crude oil, with the main markets reacting to further bad news about the coronavirus epidemic.In addition, the global uncertainty suggest investors’ desire to close positions in risky assets such as cryptocurrencies.
Futheremore,from a short term view the impact of global economy is very indecisive but bitcoin is currently trading like a risk on asset. Despite having a negative correlation earlier, cryptocurrencies market may continue to fall in tandem with the global equities market and other leading assets apart from Gold.”
I still believe in the long term fundamentals of bitcoin as an asset. At the moment not many large financial institutions are investing in bitcoin or crypto assets,However in time when there are, regulatory and settlement risk this will change. Once that happens then bitcoin will be on a par or overtake gold as the safe haven asset.