Bitcoin accelerated its epic sell-off on Thursday as coronavirus fears continued weighing heavily on the already fragile stock markets. Bitcoin (BTC) plunged to as low as 3,700, before bouncing back to slightly above $5,000.
Notably, this was the largest single-day drop for the flagship cryptocurrency since 2013.
Global Markets In Freefall
On Wednesday (March 11), the World Health Organization labeled coronavirus a global pandemic. This is because the disease is spreading fast to new countries each day without any hopes of containment in sight. There are at least 135,809 cases globally as we speak and 4990 people have lost their lives to the novel virus, according to data.
Hours later, President Trump announced that the US government would be suspending travel from Europe to the US for the next 30 days starting from Friday midnight (today), in a bid to prevent further spread of the virus. This news was not received well by the markets as the Dow Jones shed approximately 10 percent in its worst one-day crash since 1987.
Bitcoin Price Whipsawed, Safe-Haven Narrative Exposed
Bitcoin has not been spared in this market meltdown. The volatility witnessed in the crypto markets is insane. The OG crypto plummeted from $8,060 to around $4679 in rapid succession, representing a drop of circa 42%. BTC even briefly dropped sub-$4,000 but recovered back to the $5K zone within minutes.
Altcoins were also clobbered hard, as evidenced by the massive double-digit losses. Ethereum, the second-most valuable blockchain, experienced a great deal of congestion which led to its gas prices skyrocketing to new highs.
In the past, bitcoin has been touted as “digital gold” because of trading alongside gold during times of uncertainty. Market pundits have asserted that BTC has proven itself as a safe haven, just like gold, because it has surged during times of turmoil, for instance, during the US-Sino trade war last year.
However, this time around things have unfolded differently. Bitcoin has been trading like a risk-on asset alongside traditional markets which has surprised many. Suffice it to say, bitcoin’s safe-haven status has been unequivocally tossed out the window – for now.
Nonetheless, the nagging question remains: why did bitcoin crash so hard?
What Caused Bitcoin’s Historic Crash?
There are many theories that have been postulated to try to explain why the crypto markets experienced such a devastating fall.
First, the traditional markets sell-off appears to be a culprit. The stock market rout has accelerated over the last few weeks leading to the loss of trillions of dollars in value due to coronavirus concerns. Oil has also slumped following the collapse of the OPEC alliance which stirred the Saudi Arabia oil price-war.
The weak situation in the traditional markets has had a noticeable domino effect on the cryptocurrency markets. Bitcoin is a burgeoning asset. As such, the gloomy scenario in the traditional markets has caused the price of bitcoin to spiral to unprecedented levels.
Secondly, PlusToken scammers dumped in the market right before bitcoin took a nosedive. Last weekend, the infamous Chinese Ponzi Scheme moved at least 13,000 of the stolen BTC to mixers before dumping on exchanges. This dumping, unfortunately, coincided with the coronavirus fears in the markets, further exacerbating the situation.
Whatever the reason, bitcoin enthusiasts are still holding strong. They expect that when everything stabilizes, bitcoin will emerge as the winner.
Featured image from Pixabay