Bitcoin prices tumble too as stock markets give up their gains

Posted: 12 June 2020 7:14 pm

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Bitcoin is moving with stocks, but the yellow metal is a rock.

Stock markets plunged today (Thursday US) as US Federal Reserve Chairman Jerome Powell gripped the nation by its lapels and slapped it across the face, ordering it to "snap out of it" and "get a grip on reality".

Those may not have been his exact words.

His exact words were "many millions have lost their jobs" and "there is great uncertainty about the future".

It's the same message that's been driven home by every statistic over the last few weeks, but this time it appears the markets sat up straight and listened. All major markets dropped on the day, with some of the biggest plunges being those most vulnerable to coronavirus disruption, including airlines and cruise lines.

Energy stocks were also hit especially hard, and Bitcoin took a corresponding ~5.5% dive at the same time.

Correlation remains

It's a mirror of Bitcoin's behaviour over the past while, and it looks like it's still solidly correlated with the traditional markets.

"Obviously, those who were hopeful that the two markets might soon decouple from one another (raises hand), are gonna have to wait a little (or a lot) longer," said Quantum Economics analyst Mati Greenspan.

"Bitcoin, along with the entire emerging digital asset class, are very much considered risky assets. The fact that bitcoin had any reaction at all to the Fed yesterday is a clear sign that either a) institutional money is playing a much larger role in the market these days, or b) retail traders are getting more savvy and reacting more to their surroundings."

"The current situation can hardly be described as a panic at this point though. Both gold and the U.S. dollar are pretty much flat on the day as of this writing. So even though risk assets are selling off pretty intensely, there's no real flight to safety happening at this time," he said.

Still, simply not dropping gold is making a statement. In the big global sell-off of March, we saw gold prices decline along with Bitcoin, stocks and everything else not nailed down. That we're seeing another similar sell-off now, which is extending to crypto and stocks while leaving gold unscathed, suggests that Bitcoin is still very much a risky asset, while gold isn't.

Despite some recent validation from hedge funds, Bitcoin is not yet a safe haven. Perhaps the potential upside makes up for it though?

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Disclosure: The author holds BNB, BTC at the time of writing.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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