Bitcoin has had the worst day since 2013 and this has been shaken the confidence of investors who have supported it all along.
Brutal sell-offs in the stock market are killing other assets. And stories of Bitcoin's safety and hiding assets have been thrown out the window.
Bitcoin has a very strong volatility history but it is all pale compared to what happened on dark Thursday. The king of cryptocurrencies bowed to the macro-selling force, causing it to lose nearly 40% of its value within one trading day. The last time this happened was in 2013 when bitcoin plummeted by nearly 50% in one day.
– Arcane Research (@ArcaneResearch) March 12, 2020
Hardly anyone could have foreseen this decline, since Bitcoin has made leaps of fundamentals. One thing to note is that the cryptocurrency market has never faced a global financial crisis, so its existence through this stage, can enhance their value in the future. .
However, the sharp decline in the stock market has led investors to abandon bitcoin to protect their assets, which shows that at the present time, Bitcoin is still not a safe haven. for investors.
Selloff on The S&P 500 is killing other types of assets
America's leading stock index is currently down more than 26% from the highest level of 3,393. The bears bent the strength of this index and forced it to stop trading for 15 minutes right after the new session opened (level 1: when the index dropped 7% in 1 day). Since its launch in 1987, this is the first time the index has been disconnected twice a week.
The severity of the sell-off in the stock market has a huge impact on other asset classes. Gold, an asset considered safe haven during turbulent times, is also being sold out brutally. Bitcoin, an asset dubbed digital gold, is also suffering heavy losses.
Traders are looking for liquidity in everything
A stock market crash is a vicious cycle and very difficult to prevent. Traders who borrow excessively are liquidating their entire portfolio portfolio to meet “margin calls”. This led to increased selling pressure and killed buying pressure, and exacerbated the decline.
We have seen this on the stock market.
Jonathan Ferro, market analyst for Bloom Bloomberg, summed up the situation perfectly. He wrote:
"People are mobilizing cash to meet losses and buy margin orders. Market liquidity is freezing, people are struggling to trade. The buying mind has completely changed. "
Traders are looking for liquidity in everything they can, as pointed out by Simon Mikhailovich.
A Swiss friend on his conversation with a trading desk of a major Swiss bank – “there are massive margin calls & the customers are selling gold en masse to fund these margin calls.”
– Simon Mikhailovich (@S_Mikhailovich) March 12, 2020
“Traders are selling everything they can, including gold, to save their margin calls.”
Bitcoin market cap is only a drop in comparison to trillions of dollars that power the stock market and gold.
The liquidity of Bitcoin is gone
Bitcoin is acting like a risky asset. Reports of the safe king and the non-correlation of the cryptocurrency king have been exposed. Liquidity in the BTC market is being sucked up when Bitcoin has plummeted to a recent low of $ 3,850.
A trader revealed the fragile order book of Bitcoin / US Dollar (XBT / USD) pair on Bitfinex. In other words, everyone is selling and the buying force is very thin.
Let's face it, bitcoin is too young to be in the middle of a financial crisis. As a risky asset, it could be one of the first assets to be sacrificed in times of turmoil.
However, if it can overcome this crisis, it will affirm its position in the traditional market. A strong growth will come to it, when the storm passes.
You can see the price of Bitcoin here.
Disclaimer: This is not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.
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