Bitcoin’s safe-haven potential is called into question after 40 per cent plunge
The long-touted safe-have potential of Bitcoin (BTC) has been called into question yet again, after the world’s leading cryptocurrency plunged by 48 per cent on Thursday, March 12.
Bitcoin closed the day at around $4,800, having started just under $8,000.
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Other cryptos followed its lead, with Ethereum (ETH), XRP, Bitcoin Cash (BCH) and Litecoin (LTC) all down between 30 and 40 per cent. Altogether the crypto market had $93bn (£73bn, €83bn) in value wiped in Thursday trading.
Although Bitcoin still dominates the cryptocurrency landscape with a 63.8 per cent market share, the scale of its recent fall has weakened the argument that it is a reliable store of value, akin to digital gold.
Embedded in the first Bitcoin block ever mined was the text: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks". While this was intended as a timestamp marking its inception, it also signalled the currency’s desire to create a means of exchange less affected by the world of fiat money and central bank intervention.
However, with Bitcoin growing in popularity throughout the past decade it has become interlinked with the health of the global economy. Consequently, as stock markets throughout Europe and North America suffer their worst plunges in decades, the crypto has suffered. All gains since spring 2019 have now been wiped.
Some so-called HODLers and Bitcoin bulls will point to the fact that other traditional safe havens, such as gold, have also fallen this week and argue that Bitcoin like other more liquid assets will likely fall victim to margin calls.
Friday trading has thus far afforded some hope to such a viewpoint, with Bitcoin gaining more than 8 per cent to stand around $5,459 by late-morning (GMT).
However, sceptics may simply argue that such a rebound only emphasises the crypto’s volatility.