Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
Just when the global financial markets were in a state of turmoil, Bitcoin failed to prove itself as a “safe haven” for investors. After rising 40% during early 2020, BTC ended the Q1 2020 with 10% negative returns year-to-date.
Just as we are entering the second quarter of 2020, the crypto markets seem to be stabilizing after a major correction. Bitcoin, which has been a star performer in the early half of the Q1, faced massive sell-off in the second half.
As on 31st March, Bitcoin ended the first quarter with 10% negative returns year-to-date. At press time, Bitcoin (BTC) is trading at a price of $6352 with a market cap of $115 billion. Thus, Bitcoin alone contributes nearly 65% of the overall cryptocurrency market cap.
Dow ended the first quarter with a 23% drop while S&P 500 ended 20% down and Nasdaq Composite ended 14% down.
Bitcoin Performance in Q1 2020
Despite several experts claiming that crypto markets are contrary to the traditional stock markets, things don’t actually seem so! In fact, both the traditional and crypto markets performed similarly during the Q1 2020.
The year 2020 started on a pretty good note for both – traditional stock market and the crypto market. By mid-February, Dow Jones was surging to its all-time high above 29,000 levels. Similarly, Bitcoin was trading at a 40% premium year-to-date during the same time.
However, the COVID-19 outbreak in China and later across the globe ended the party for the markets. The impact was so massive that within a month’s time, Dow corrected 40% from its peak. The same scenario was visible across the global markets.
In fact, the crypto markets also dodged investors during this period as it all came crashing down. Bitcoin collapsed 50% from its 2020-peak just at the time the global markets were collapsing. Hence, it would be difficult to call Bitcoin a “safe haven” in such times of market turmoil. On the contrary, gold has trumped Bitcoin rising 4% in the same period.
Expert Views on Correlation of Bitcoin and Equity Markets
As said, Bitcoin and the overall crypto market have been trending downwards along with traditional markets. This movement has severely undermined this narrative that Bitcoin is a “non-correlated” asset. However, this is not the first time that Bitcoin is behaving similarly to the traditional financial market. Siddhartha Jha, a former Wall Street analyst, said:
“The lack of correlation to equities was a bit premature to announce. We had periods of high correlation, for example, in 2018, when bitcoin fell along with equities in December of that year”.
Speaking to CNBC, Vijay Ayyar, head of business development at cryptocurrency exchange Luno, said:
“Bitcoin is still a relatively smaller asset class that is increasingly uncorrelated to traditional asset classes and this is in the process of being established as we speak. This is why I believe the current market environment is a big test for Bitcoin and given how young the asset class is, it has actually held up quite well”.
While two years ago, people were wondering whether Bitcoin and altcoins had any chances to stay in the world of finance, today there are no such questions any more. Now we are wondering whether BTC will be able to attract many traditional investors and what future it will have.