Bitcoin Was Supposed to be a Safe Haven Asset, So Then Why is The Coronavirus Proving to be a Superior Enemy?

Adoption by Sal Miah  | 5 days ago
Bitcoin, Coronavirus, Gold
2 min read

Global financial markets are feeling the economic effects of the coronavirus. Its reach is even being felt in the cryptocurrency community as Bitcoin plummeted over the weekend to levels last seen in January. However, the level of loss, compared to other commodities, suggests that Bitcoin’s price drop wasn’t the result of the coronavirus.

The price drop also suggests that Bitcoin may not be the safe-haven asset that the market thought it would be. Such economic times result in investors seeking commodities that retain their value despite prevailing market conditions. From the price of Bitcoin, it’s as though investors are not fully convinced of Bitcoin as a stable commodity.

Mass Panic Selling

As the economic effects of the virus started being felt, investors were quick to protect whatever profits they had made in previous years. This resulted in the rapid sell-off of their assets which greatly lowered the value of various stocks globally.

The gains from their sell-offs are meant to fund their purchase of commodities such as gold which is known to retain its value.

Investors Still Prefer Traditional Assets

Investors may have avoided Bitcoin due to the unpredictability of its price movements. Further, the unbelief in Bitcoin suggests that investors are still unconvinced about the profitability of Bitcoin in future. It indicates that in times of crises, investors will move to traditional assets or established digital assets, as seen in the case of Netflix.

Changing this notion requires massive adoption of decentralized platforms globally. Assets such as Netflix stocks only went up due to their reach to millions globally. If decentralized assets could be adopted similarly, Bitcoin and other cryptocurrencies will then be viewed as stable and safe stores of value.


Featured Image Source: FDA