Bitcoin has long carried the informal title of digital gold. This title implies that Bitcoin was believed to share certain qualities with gold, namely being a protective asset during periods of market turmoil.<\/p>\n
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But being conceived after the global financial crisis of 2008\u20132009 Bitcoin never had a chance to undergo a stress test of that magnitude. As the world is arguably on the brink of another global recession, many eyes are fixed on Bitcoin.<\/p>\n
Yet lately Bitcoin\u2019s price has been moving along with risk assets like stocks, falling close to 30% in a matter of days, forcing many investors to decry its safe-haven qualities.<\/p>\n
Is Bitcoin a protective asset? Was it ever? In this article, we will provide additional context and explore expert opinions on this matter to help you make your own decision.<\/p>\n
The situation in the markets was not very stable from the start of the year. It all started with the U.S.-Iran conflict in January. When the coronavirus outbreak hit, it disrupted the Chinese economy and spawned anxiety around the world. The plummeting oil prices caused by Russia\u2019s exit from the OPEC+ agreement were the final blow.<\/p>\n
The combination of these factors and the preexisting condition<\/a> of the enormous debt bubble triggered the scariest decline in the stock market since the 2009 global crisis.<\/p>\n On March 12th, several simultaneous events made the level of panic around the world skyrocket:<\/p>\n This resulted in a panic sell on the Bitcoin market, making Bitcoin\u2019s price drop below $6,000 for the first time since May 2019. To recall that day in finer detail, check our dedicated piece<\/a> with expert comments and live updates as the situation evolved.<\/p>\n To many, this outcome was unexpected.<\/p>\n https:\/\/twitter.com\/brian_armstrong\/status\/1237070332374081536<\/p>\n One would think that Bitcoin, being a protective hedging asset, would surge during the panic in the stock market. What went wrong?<\/p>\n Trader and analyst Alex Kruger predicted the sharp drop in Bitcoin\u2019s price a few days prior. In his opinion, on the backdrop of panic on global financial markets investors were looking exclusively to de-risk.<\/p>\n https:\/\/twitter.com\/classicmacro\/status\/1232792826330722304<\/p>\n As traditional stock markets were plummeting, Bitcoin was no safe haven either.<\/p>\n Time to pay attention. Bitcoin is trading like a risk-on asset. Not a safe haven, but the exact opposite. Following stocks down – although ironically stocks are the ones trading like low quality shitcoins. pic.twitter.com\/IPqloMzQs9<\/a><\/p>\n — Alex Kr\u00fcger (@krugermacro) March 12, 2020<\/a><\/p><\/blockquote>\n\n
Bitcoin Is Trading Like a Risk-On Asset<\/h2>\n
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