Bitcoin price has dropped -9% the last 7 days as global fears mount. Despite Bitcoin historically being uncorrelated to traditional markets, its seen different price action this time around. Many have been blaming the sell-off on Coronavirus outbreaks and the impact it has on Bitcoin mining. Research shows different, as the sell-off seems to be stemming from a much larger issue. 

Bitcoin & Altcoin Prices 

Cryptocurrency Price 7 Day Change
Bitcoin $9,214 -8.94%
Ethereum $241 -13.86%
XRP $0.2444 -17.25%

The entire cryptocurrency markets have been in a downward spiral. This comes during a time where many were calling for a “bitcoin boom” based on upcoming events such as “bitcoin halving.” On the flip side, many other analyst were predicting “altseason” based on the surge altcoins posted in the beginning of the new year. In a recent market report, Bitcoin price looked very bullish, but we outlined a scenario where you could argue a bearish environment. Based on the technicals, Bitcoin price was heading into bearish territories if it rejected $9,400 levels.

“In a scenario where $9,400 is tested and rejected, Bitcoin could very well head to $8,600 levels.”

Even though this was considered a rate event, it ended up happening and you saw the drop continue once $9,400 levels were rejected on technicals.

Coronavirus Outbreak

Coronavirus outbreaks are continuing to create market chaos on a global scale. This is a rare situation where somebody like the Fed can’t really step in and do anything to stimulate the economy. In order to stimulate an economy you need money and production. With China shutting down numerous operations, it’s putting a strain on domestic companies production and supply chain. According to Worldometers , there have been over 81,000 Coronavirus cases. During this time, there has been over 2,700 deaths that have occurred.

Bitcoin Hash Rate

It was reported not too long ago that Bitcoin mining facilities were being shut down in China to help protect citizens. At the time, many people believed this would have a negative result on Bitcoin price. Historically speaking, bitcoin price has followed hash rate pretty well. This time around, that correlation seems to be irrelevant. Actually, Bitcoin hashrate has been holding up quite well recently and shows no dramatic drop whatsoever.

This is very interesting, taking into account the impact China has over Bitcoin mining. According to a Forbes report –

“While we expect this ratio to fall again as latest generation hardware further makes its way into the non-Chinese market, at the time of writing, as much as 65% of Bitcoin hashpower resides within China – the highest we’ve seen since we began our network monitoring in late 2017.”

Why Is Bitcoin Price Selling-Off Then?

With Bitcoin historically serving as a “global hedge”, why has it failed to do so this time? It’s worth noting that Bitcoin has not always successfully hedged the market. Arguably speaking, this has been a concept that has been absolutely blown out of proportion. It’s agreeable that Bitcoin price has successfully hedged in some scenarios, but there’s been numerous times where it hasn’t. Bitcoin is still an extremely young asset class that experiences volatility. With Bitcoins current infrastructure it’s not fair to assume it will hedge the market every time like gold tends to do.

With Coronavirus, it’s fair to believe many people in traditional markets are not thinking about Bitcoin whatsoever. In the current environment, people are selling their stocks to sit liquid ( cash ). In an event where Coronavirus takes over a larger geographic region, people want to ensure their liquid assets are safe. This is not a time where a traditional retail investor will try to invest in Bitcoin for the first time. Bitcoin has witnessed solid traits of “market hedging” over the years, but in an extreme environment where banks had to shut down, how would one sell their bitcoin and convert that to fiat to live off of? In summary, Bitcoin price can be solid hedge during normalized environments, but during a global pandemic, Bitcoin is still too young to take on that role.

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