As global stock markets saw massive sell-offs overnight, cryptoassets also fell sharply, with both and recording double-digit losses over this past weekend. However, some industry observers claim that crypto’s mainstream moment as a utility may finally be here, but early-stage projects with limited adoption might become ghostowns.
As of press time on Monday (08:45 UTC), bitcoin slightly recovered and is down by 8.6% to a price of USD 7,998, while ETH is down by 9.5% to USD 208. Many smaller altcoins from the top 10 are seeing even bigger losses of between 9% and 14%.
The sharp drop comes as the broader financial markets are experiencing unprecedented turmoil caused by fears about what the Coronavirus might mean for the economy. As of press time on Monday morning, most Asian stock indices have already sold off between 3.5% and 5.5%, with U.S. futures also pointing sharply lower.
Noteworthy was also the massive drop in the oil prices as the markets opened on Monday morning, with the price of Brent oil falling by more than 25% from Friday’s close to Monday’s open. Gold, meanwhile, is nearly unchanged from the day before, trading at USD 1,670 per ounce.
Although the debate of whether bitcoin is a risk-on or risk-off asset continues, most analysts agree that it is above all an uncorrelated asset. However, when we still see selling during stock market panics, it appears likely that the majority of the selling is caused by investors who are forced to raise cash in order to cover losses in other markets. To avoid margin calls, these large investors will, in other words, sell anything they have, and that includes “safe havens” like bitcoin and gold.
The same explanation was highlighted by several crypto market observers, saying that investors have no choice but to sell:
Crypto is down because traditional investors need to sell assets to cover other positions that are getting rekt.
— darren.eth ?????? (@DarrenMills)
Additionally, some also pointed out the fact that more institutional ownership of bitcoin also means more selling during stock market panics:
I've never bought into the idea that Bitcoin would prove to be a good, un-correlated asset in a downturn.
— Joe Weisenthal (@TheStalwart)
However, the market carnage also forced a large number of retail crypto investors to liquidate their long positions, as evident from the high number of bitcoin futures liquidations seen on Sunday and Monday on the BitMEX derivatives exchange.
As far as ETH goes, the asset did perform better than bitcoin in the early hours of Monday trading. However, some analysts have warned that the number two digital asset by market capitalization may be in trouble if it breaks below the key trendline that has supported this year’s uptrend for the asset.
#Ethereum sitting on a do-or-die level for its current trend.
— Jacob Canfield (@JacobCanfield)
As of this writing, ETH has already closed its weekly as daily price candles below the trendline found around the USD 222 level, which according to crypto analyst Jacob Canfield could suggest further price drops below USD 200.
