The bitcoin price has dropped more than eight percent in just the last 24 hours alone, and it looks like the recent move has got everyone huffing and puffing.
The Bitcoin Price Has Taken a Dive
Analysts and traders alike are terrified by what they’ve witnessed over the last day, as the asset’s fall appears to have been sparked not by the stock market crash but by people floating towards cash. Suddenly, bitcoin doesn’t appear to be the answer everyone was looking for.
It’s been reported time and time again over the past two months that bitcoin has suddenly surged not only in price but in overall legitimacy. Following the approval of the stimulus bill that saw more than $2 trillion going back into the American economy, many saw the idea of printing money “out of thin air” as a temporary, short-term solution that was likely to lead to bigger problems such as inflation.
Thus, many turned to bitcoin, crypto, gold, and other speculative assets as a means of hedging their wealth against these sorts of problems. This lasted for some time and the currency’s price has nearly reached $10K a few times over the past month, but now it looks like everyone is once again “cash happy.” Why the sudden change?
John Todaro, director of digital currency research for Trade Block, mentioned that this trend is occurring through all corners of the equity market space, which he says has fallen by about five or six percent in just the last two days alone. He comments:
There was a general flight to cash today, with even gold ETFs trading down. Bitcoin and other cryptocurrencies were not immune to the sell-off and in a heightened correlation between assets, nearly everything traded lower.
Avi Felman – head of trading at Block Tower Capital – offered similar sentiment and attributes the fall of bitcoin to a lagging interest in equity markets. He explains:
The recent sharp drop in the equity markets is rattling investors who have watched bitcoin struggle to break $10K even in a risk on market. Now that equity markets are suggesting there may be continued downside, digital asset investors are reminded of the last time equity markets fell out (which coincided with a large bitcoin drawdown) and are selling out of fear about a potential resumption of the equity bear market.
Lagging Jobs and Falling Stocks
Denis Vinokourov – head of research at digital asset firm Bequant in London – provided a different explanation for the bitcoin drop. He attributes it to ugly forecasts regarding the job market, which he says despite recent improvements, is still looking rather poor for the rest of 2020. He mentions:
Stocks fell across the board and it appears crypto markets are once again not immune when it comes to cash crunches and margin calls. The move is likely exacerbated by already bearish market positioning seen in the options market.