The recent sharp decline in Bitcoin’s value has once more cast doubt on the notion that it serves as a ‘safe haven’ asset.
Editor Thenews24.net
2 min read
Bitcoin price fallchart with crash down arrow. (Used clipping mask)
This morning, cryptocurrencies experienced significant declines, with bitcoin dropping 15%, marking its worst performance since June 2022. This sharp fall has reignited questions among investors about bitcoin’s role as a store of value and a hedge against market instability. Over the weekend, a broad-market sell-off intensified, leading to bitcoin’s loss of up to 17% on Monday. The Dow Jones Industrial Average plummeted by as much as 1,000 points on Monday, following a 611-point drop on Friday, while the Nasdaq Composite, heavily weighted with tech stocks, saw a decline of up to 6%.
Bitcoin is often expected to resist such market trends, but crypto investors and analysts argue that bitcoin serves multiple purposes simultaneously. They believe that the current market volatility could eventually present a good buying opportunity. However, for short- and medium-term traders, bitcoin’s close correlation with risk assets might not make it an ideal investment. Long-term investors, on the other hand, highlight that cryptocurrencies are still outperforming the market, with bitcoin up about 20% this year compared to the S&P 500’s 9% gain.
Noelle Acheson, an economist and author of the “Crypto Is Macro Now” newsletter, explained to CNBC that bitcoin acts as a hedge against uncertainty, a risk asset, and a play on interest rates. This multifaceted nature gives bitcoin a more stable foundation compared to other risk assets like stocks. On Monday, companies associated with bitcoin, such as Coinbase, MicroStrategy, and bitcoin miners like Marathon Digital, Riot Platforms, and CleanSpark, saw their shares drop by double-digit percentages, although they recovered somewhat by midday.
Before the weekend, bitcoin had a strong support level around $55,000 and struggled to surpass the $70,000 mark. Acheson noted that value investors might view $55,000 as an attractive entry point, especially if bitcoin is seen as a long-term hedge against growing global uncertainties.