Bitcoin is still dropping. Since breaching the $9,500 support, the asset has gone on to retest the $9,100 position. Most investors continue to sell and bulls don’t seem like they are accumulating. Its latest drop has correlated with a sharp decline in the traditional markets. This has in itself led to a debate over the purpose of Bitcoin as a safe haven. One prominent analyst has pointed out that the sell-off is led by coronavirus fears is led by a need to increase their cash options.
Coronavirus Epidemic’s Effect On Bitcoin
Despite some 25% of crypto users stating that the coronavirus would have no effect on Bitcoin, it has been clear that it is affecting Bitcoin. Unfortunately, it is not acting as most would have predicted. Bitcoin like traditional markets equities, stocks, and bonds, is on free fall.
Some have argued that this is proof that it is not a safe haven. In the past, its lack of correlation with traditional markets saw Bitcoin branded a safe haven that performed positively when there was economic trouble. Now it’s clear its a risk asset which means it can be dropping like traditional assets when there is panic.
#Bitcoin is neither money nor a currency. It’s a digital asset. The question @APompliano and I are debating is whether it’s a safe haven asset that stores value over time, or a risk asset with a market price than can rise or fall substantially over time. The answer is obvious.
— Peter Schiff (@PeterSchiff) February 26, 2020
Currently, there is increased fear with the spread of the Coronavirus. This has seen most traditional assets drop drastically. World economies are as well at a standstill.
You’ll be able to tell your grandkids about this one…
Bond yields on the US 10-year note are now at their all time lowest levels.
That’s some serious 🛫 to safety right there. pic.twitter.com/EAQiDeDHR8
Investors’ Need To Increase Cash positions
Bitcoin and the cryptocurrency market at large have also faced major bearish pressure in the last few days. Unlike its main rival, Gold, which is soaring, Bitcoin has lost over 5% this week. So what has gone wrong?
Doesn’t seem unreasonable that people are selling their assets (equities, $BTC and even silver) to just increase their cash positions out of economic instabilities due to the coronavirus.
Analyst Crypto Michaël says the sell-off has not come as a surprise. Investors are increasing their cash positions. The spread of the epidemic means that there could be more cities under quarantine, a need for masks and other resources. Investors are looking to have cash options to ensure if faced with this reality, they are well-financed.
That’s $15,000,000,000 (yes billion) USD equivalent of “free” money that’s going to go somewhere.
How much of it do you think will come in to #crypto?
— CZ Binance 🔶🔶🔶 (@cz_binance) February 26, 2020
The same would happen if there is a major recession that sees people lose their jobs and are unable to get money.
Investors are now looking at the $9,000 position. If broken there is a possibility f a further drop to the $8,800 support. On the higher side, a bounce to $9,400 would be ideal to get bullish sentiment going again.