Bitcoin Price Plunges To Lowest Since January, Safe Haven Questionable

The crypto market selloff that followed the failed OPEC agreement yesterday had erased over $26 billion in value. Its most prominent digital asset, Bitcoin (BTC), plunged to a level not seen since January. From reaching its highest point this year at nearly $10,500 in February, the top crypto is trading presently under $8,000 and even dipped to $7,600 on Monday.

Aside from trailing the drop in oil prices, cryptos also mimicked the panic selling in stocks. Global stocks were down on Monday, and some opened slightly lower on Tuesday like the Tokyo market, which fell 1% in early trading and China opening 1% lower. When the U.S. session began, trading was halted as it triggered the circuit breaker when the S&P 500 dropped 7% in just five minutes. The Dow Jones industrial average and Nasdaq also ended the day with losses amounting to more than 7%.

Some analysts believe that stocks badly needed a correction, and the coronavirus fears just might be the perfect excuse for investors to sell some of their holdings. Still, the uncertainty and the economic threat brought about by the virus is a concern for the market.

In a case like this, a flight-to-safety takes place, which boosts the price of safe-haven assets like gold, and that is what happened in yesterday's trading: spot gold reached $1,700, and it hasn't done that since 2013. Bitcoin, which was supposed to be gold 2.0, snubbed any correlation claims and went on to close 4% in the red on Monday, marking its fourth straight day of decline.

The assertions that Bitcoin is turning into a macro asset has faltered since investors never really used the digital currency to shield themselves from the losses in the stock market. The king of cryptos only ticked higher when there were threats of war between the U.S. and Iran in January and when the Chinese market reopened trading the month after, but it never moved higher after weeks of dismal stock trading.

CEO and CIO of Three Arrows Capital Su Zhu offers a counterargument about BTC's failing correlation.

"There's no such thing as an asset that automatically goes up when other things go down. The closest you can hope for is broad long-term low correlation, which Bitcoin has certainly exhibited. We are still much higher than the Dec 2019 lows. Hug your mother if you want hugs," Zhu tweeted.