- Bitcoin plunged by nearly 90% in the last hours.
- The brutal stock market selloff is killing other asset classes.
- Bitcoin’s safe-haven and uncorrelated asset narratives have been thrown out of the window.
Bitcoin has a history of heart-stopping volatility but they all pale in comparison to what happened in the last hours. The king cryptocurrency bowed down to macro forces as it lost nearly 90% of its value in yesterday’s trading. The last time something similar happened was back in when bitcoin plummeted by close to % in a day .
Virtually no one has foreseen
yesterday’s drop considering that bitcoin has made tremendous leaps in fundamentals. However, one must also take into account that the entire crypto market has never faced a global financial meltdown. The stock market tanking has ignited a sequence of events that forced investors to dump bitcoin.
The S&P Selloff Is Killing Other Asset Classes
America’s bellwether index is now down by over (% from its peak of 3, 5. Bears are flexing their muscles as the
S&P tripped circuit breakers and halted trading. Since its implementation in , this is the first time that circuit breakers kicked in twice in one week.
The severity of the stock market selloff has ripple effects that impact other asset classes. Gold, a supposedly safe-haven asset in times of turmoil, is also in the midst of a brutal dump. Bitcoin, an uninitiated asset, appears to be taking the heaviest damage in the middle of the crossfire.
Traders Are Finding Liquidity Where They Can
A stock market crash is a vicious cycle that’s very difficult to stop. Overleveraged traders are selling all assets in their portfolio to meet margin calls. This leads to increased selling pressure which kills buying momentum which further increases selling pressure and so on.
We’re seeing this unfold in the stock market.
Jonathan Ferro
People are raising cash to meet redemptions and margin calls. Market liquidity is freezing up, people are struggling to trade. The buy the dip mentality has totally flipped.
Traders will find liquidity where they can even if it means selling assets outside equity markets.
Bitcoin’s market cap is a drop of water in comparison to the trillions of dollars that power the stock market and gold
Bitcoin’s Liquidity Is All But Gone
Bitcoin is performing like a risk-on asset. The safe-haven and uncorrelated narratives of the top cryptocurrency have been exposed. Liquidity in the BTC market is being sucked dry as the cryptocurrency is dangerously close to trading back to $ 3, levels.
One trader revealed the thinning order book for the Bitcoin US Dollar pair (XBT / USD) on Bitfinex. In other words, everyone is selling and almost no one is buying.
The above should not be considered trading advice from CCN.com. The writer owns bitcoin and other cryptocurrencies. He holds investment positions in the coins but does not engage in short-term or day-trading.
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