Institutional investors are shying away from Bitcoin as the corona virus spread fear in the global market

When investors seek security amid the global outbreak of corona virus and collapse of the stock market, they are unlikely to switch to Bitcoin – at least institutionally.

Bitcoin has long been promoted as an uncorrelated asset, meaning the price movement of this currency does not follow other assets, such as stocks. Some supporters also see Bitcoin as a safe haven – where investors can expect to earn profits in times when other markets become more chaotic. Last week's market performance and revelations about the corona virus spread put these two points into the test.

The Dow Jones industrial average (DOW) fell sharply on Monday morning after opening – losing more than 7% after oil prices recorded the sharpest decline in 30 years at the end of the week. Massive sell-off caused the US stock market to stop trading for 15 minutes.

In some cases, Bitcoin avoided a broader market sell-off, trading in green while other assets plummeted. For example, the price of the king's coin has risen 4% from March 4 to March 6, at the same time the S&P 500 has dropped more than 2%. This morning, however, BTC presented a completely different story when its price traded 3%.

However, since the beginning of February, the prices of Bitcoin and the S&P 500 have moved closely together, while gold and the US Treasury Bond have outperformed.

During the flight to a safe place, Bitcoin was rejected as a hidden asset. Source: The Block
Return index of 30 days ago on shelter assets compared to S&P 500 and BTC. Source: The Block

Indeed, Tim Culpan of Bloomberg Opinion has shown that Bitcoin and gold have moved in opposite directions as the corona virus outbreak is getting worse. Indeed the correlation between Bitcoin – often referred to as “digital gold”, and gold has turned back to -0.22.

In addition to price action, data from the CME Group's Bitcoin futures market also shows institutional investors are evading Bitcoin. If Bitcoin is indeed a safe haven, then one can expect an increased volume of transactions as investors seek security, as The Block's Ryan Todd noted. Todd said:

"Looking at the Bitcoin future data of CME Group, in my opinion, this is the easiest and cleanest product for traders, traditional hedge funds and large asset managers to come into contact with Bitcoin, You expect that if institutional investors start to show their confidence in Bitcoin as gold 2.0, then we will see huge volumes and an increasing number of open positions in the product during the past two weeks. "

But that did not happen, as the data below shows:

Daily trading volume and average number of open positions in 7 days of CME Bitcoin Futeres. Source: The Block
Daily trading volume and average number of open positions in 7 days of CME Bitcoin Futeres. Source: The Block

The daily trading volume for the CME futures contract peaked a day before US stocks hit an all-time high (February 19) with a volume of over $ 1 billion, before falling to nearly 75. % present. Bitcoin CME futures market marked a day with the lowest volume in 2020 on Friday, while the number of 7-day open contracts dropped by 25% in the past two weeks.

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According to The Block
Translated by ToiYeuBitcoin