Last February 24th, Bitcoin’s price dropped by 4.6% while stock shares fell by 3.6%. The stock market crash is due to the fear of the coronavirus, which puts the world economy at risk.
The US Stock Market collapsed last February 24th to one of its lowest levels in the last six months, due to the fear of the coronavirus. Meanwhile, Bitcoin (BTC) barely staggered, at least in terms of the evident volatility recorded throughout its trading history.
On February 24th, Bitcoin fell by 4.6% at 6:17 pm (UTC time) reaching USD 9,517, which represents the biggest drop within a week. It is worth mentioning that, so far this year, the main cryptocurrency has suffered other losses of 3% or more over one day. However, due to the strong bullish rally in recent months, Bitcoin still records an increase of 32% in 2020.
It is relevant to highlight that such performance contrasts sharply with the Standard & Poor’s 500 index of US large stocks, whose collapse by 3.6% was the largest in a single day since early August and ended the investors’ earnings of the year.
This situation could renew a current debate among investors about whether Bitcoin should be traded as a risk asset, such as stocks and bonds, or if it is more similar to a valuable refuge asset, such as gold or US Treasury bonds. There is also the possibility that it is not any of the two things, that it is in its category and that it does not correlate with the price of traditional assets.
The news reports on the coronavirus were not the only factors that potentially affected Bitcoin’s price last February 24th. Billionaire Warren Buffett also said that he considers the cryptocurrency to be of no value.
It was reported that the stock market crash occurred at the same time as the world authorities struggle to contain the coronavirus. This situation has led to fear that the world economy, as well as delays in international travel and business, will suffer a great shock due to quarantines. Currently, the epidemic has spread to more than 30 countries including South Korea, Italy, and part of the Middle East.
Assets such as gold and US government bonds, which traditionally serve as a refuge of value, rose on February 24th. Gold increased by 1.7% reaching USD 1,676.50 per ounce, representing the highest point in recent years. US Treasury bonds also increased as their ten-year return went from 0.11% to 1.36%. In this case, the price of bonds moves in the opposite direction to the return.
It is important to note that the increase in Bitcoin’s price last January, after an incident that resulted in the death of an Iranian leader, also caused growing concern about possible geopolitical and economic disturbances. The fact led some traders to speculate that Bitcoin could have been gaining acceptance among investors as a valuable refuge asset.
According to Greg Cipolaro, co-founder of Digital Assets Research, the acceptance of the Bitcoin market could still be positive. Investment funds and other large investors are usually seeking assets mostly not correlated with traditional markets, but with a history of high returns adjusted to risk.
By Alexander Salazar