Bitcoin and the general cryptocurrency market have diverged from traditional markets to post handsome gains over the past 24 hours.
Bitcoin Rise by $500 in a Few Hours
The traditional markets, which include assets like stocks and commodities, have been struggling over the past few hours. Bitcoin and the general crypto market plunged during the weekend but bounced back during Monday’s trading session. The surge in prices saw Bitcoin rise by more $500 within a few hours, to reach the $6,400 mark.
The surge in price came after the BTC price dropped to $5,840 during last week. However, it went up by 7% during Asia’s trading session on Monday to trade at $6,344. The surge in Bitcoin’s price continued throughout Monday, March 30, and currently trades above the $6,400 cap.
Several investors still bought Bitcoin, even though equities in Asia dipped. The S&P 500 futures also recorded losses on Monday, probably due to renewed fears that coronavirus-led lockdown around the world could be prolonged.
President Donald Trump had earlier indicated that he wishes to open America again by Easter. However, he abandoned that speech on Monday to focus on social distancing rules for the month of April. His speech gave investors little hope of the economy fully working by Easter, and this led the market to tumble. Stocks and other traditional financial markets plunged following his speech as investors know it is possible to expect a deeper economic slowdown in the world’s leading economy.
The losses slipped into the European markets, with the U.K.’s FTSE 100 and France’s CAC index all recording massive losses during the trading hours of Monday.
Bitcoin Strengthening Notion That It Is a Safe Haven
Cryptocurrencies performed contrary to equities and other traditional assets on Monday. The fact that Bitcoin put in an excellent performance strengthened the viewpoint of some analysts and investors who believe it is a safe haven asset like gold.
Despite the positive performance, it is still hard to say cryptocurrencies have decoupled from equities. According to data from Arcane Research, the 90-day correlation between BTC’s price and the S&P 500 rose to 0.52 earlier this month. This is the highest level ever recorded.
Furthermore, with the coronavirus outbreak showing no signs of slowing down, investors would prefer to keep holding on to cash. According to analysts at Goldman Sachs, the economic fallout as a result of the virus has just begun. Also, governments and central banks around the world seem to have run out of ammo, as most of them have reduced interest rates and deployed other stimuli to deter the economic effects of the pandemic.
As a result of all of this, the cryptocurrency market may experience a liquidity crisis over the coming weeks, which could see the BTC price plunge lower and the cryptocurrency market experiencing a similar sell-off as equities.
Despite that, some analysts believe that cryptocurrencies will decouple from equities as institutional investors and macro traders in the market have cashed out of their crypto reserves. As such, only retail investors are left to drive the prices of cryptocurrencies higher. Richard Galvin, the chief executive of Digital Assets Capital Management, tweeted that he expects the correlation of cryptos to traditional markets to ease now especially since cross-asset-class investors have sold out. The current decline in the derivatives markets is an indication that most institutional investors have already exited the crypto market as it is down by roughly 50% since the highs experienced in mid-February.