Bitcoin big dump 20% digital gold safe-haven properties questioned

March 9, 2020, is an important day that deserves to be recorded in the history of finance.

After the "Black Monday" event in the U.S. stock market in 1987, the U.S. began to implement a stock market circuit breaker mechanism. In the following decades, the U.S. stock market only triggered a circuit breaker for the first time on October 27, 1997, when the Dow Jones Industrial Average fell by 7.18%, setting the largest single-day drop since 1915.

However, under the combined influence of multiple factors such as the spread of the COVID-19 pandemic, the U.S. presidential primaries, and the plummet in crude oil prices, on March 9, 2020, the U.S. stock market crashed again, triggering the circuit breaker mechanism for the first time in 23 years, and this shockwave quickly spread to global stock markets.

At the same time, the cryptocurrency market has also been severely impacted. Bitcoin, known as "digital gold," has continuously fallen below the key support levels of $8000 and $7800, plunging from $9170 to $7680, with a decrease of nearly 20% in just two days. The liquidation amount of futures trading on several major exchanges has reached nearly $700 million.

Most investment institutions believe that the recent plunge in the US stock market is the result of multiple overlapping factors, including the coronavirus, the Middle East oil price war, and the US election primaries. It is worth noting that before this plunge, global financial markets were already experiencing a liquidity shortage, and market performance was below expectations. In fact, market funds were not as abundant as imagined, and coupled with the presence of significant leverage, this can easily trigger a liquidity crisis.

Against the backdrop of a simultaneous plunge in global financial markets, the demand for safe-haven assets has surged. Panic-driven sentiment has prompted investors to sell off stocks and withdraw from the commodities futures market, leading to a flow of funds into safe-haven assets such as gold, cash, and government bonds.

In the blockchain field, Bitcoin is regarded as an asset with value storage function due to its scarcity, and some believe it can serve as another hedging tool. During the economic crisis in Venezuela, Bitcoin once became one of the hedging options for local citizens. However, in the recent global financial asset crash, Bitcoin did not show an upward trend like gold; instead, it experienced a significant decline.

So, can Bitcoin, known as "digital gold", really play the role of a safe-haven asset when needed?

Some senior analysts hold a negative attitude towards the statement "Bitcoin is a safe-haven asset." They believe that this view is overly optimistic and underestimates the actual scale of the Bitcoin market. Currently, the market capacity of Bitcoin is relatively small and cannot withstand a sudden influx of large amounts of capital from traditional financial markets. In addition, Bitcoin's price is highly volatile, having tripled in the first half of 2019, only to decline by nearly 50% in the second half. This high level of instability makes it difficult for professional investment teams to regard it as a reliable safe-haven tool.

From a risk-hedging perspective, Bitcoin cannot currently be compared to gold. Due to the relatively insufficient market depth of Bitcoin compared to traditional finance, coupled with the mainstream society's understanding and consensus on Bitcoin not being fully established, Bitcoin currently resembles a highly volatile asset that is highly correlated with risk assets related to liquidity, rather than a true safe-haven asset.

Nevertheless, this does not mean that Bitcoin can never become a safe-haven asset. Compared to traditional financial markets, Bitcoin is still a niche asset. It may be too early to position it as a safe-haven asset now, but on the road to becoming "digital gold," Bitcoin has undoubtedly come the farthest and holds the most potential.

It is important to emphasize that the above views are for reference only and should not be considered as investment advice. The cryptocurrency market is highly volatile, and investors must maintain a rational attitude.

BTC-0.82%
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CryptoPunstervip
· 07-22 18:24
Laughing to death, gold and Bitcoin are both experiencing a big dump, even Shuanghuanglian can't save it.
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CryptoCross-TalkClubvip
· 07-22 18:21
Suckers, hold on tight, we are live streaming a high-altitude Plummet.
View OriginalReply0
DeepRabbitHolevip
· 07-22 18:17
Fall is just a fall, I've seen it all before.
View OriginalReply0
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