Bitcoin Has Had a Hard Month
At press time, the world’s number one cryptocurrency by market cap has fallen to about $6,450, which is about $250 less than where it stood just last Friday. During that time, bitcoin was giving enthusiasts hope as it rose in anticipation of the new $2 trillion economic stimulus package signed into law by U.S. President Donald Trump as a means of combatting negative financial effects caused by the coronavirus.
While $6,700 – where it was just five days ago – may seem like a vast improvement over where it was (the currency was trading for under $4,000 on March 13), the currency is nowhere near its mid-February high of $10,350, which many analysts agree was a high point for bitcoin in 2020. Sure, BTC is showing signs of improvement at the time of writing, but there’s still plenty of recovery space.
While bitcoin’s fall this month may not have been as bad as what traders and enthusiasts witnessed in 2018, it comes relatively close. The currency lost more than half its value in just shy of one month this year, dropping from over $10,000 to about $5,400. This proved to be a key support position given that bitcoin hovered here for some time before eventually making its way back into the $6,000 range.
Two years ago, the currency lost as much as 70 percent of its overall value, and while it took many months (about 11) to make this happen, things did get very hairy, and the drop was worse considering just how much was lost. By Thanksgiving of that year, despite trading in the mid-$6,000 range for much of the summer, BTC had fallen to as low as $3,500.
Craig Erlam – senior market analyst at Oanda – commented in an interview:
Bitcoin is a highly speculative instrument, so in such risk-averse markets, it’s naturally a front-runner to be offloaded. If anyone was holding it as part of a portfolio, then I would imagine it would also be high on the list of positions to close out to cover margin calls or losses elsewhere.
His words suggest what many analysts have stated over the past few weeks: that bitcoin, which is still viewed as a primarily speculative asset, is often sold off in times of economic strife so that owners can rid themselves volatile assets to obtain hard cash, which is often seen as much safer.
Too Much Volatility!
Mati Greenspan of Quantum Economics said the following about BTC:
The volatility is largely due to the act that it’s quite new and adoption rates are unstable… A measure of success would be to see bitcoin remain on a slow, but steady incline, rather than zooming toward the moon due to global uncertainty.