Bitcoin Is No Safe Haven as Cryptocurrencies Join the Global Market Selloff
There were no good spots for investors to hide in Thursday’s global market rout, as Bitcoin and other cryptocurrencies joined the selloff.
Bitcoin, the largest digital currency, tumbled as much as 7% to the lowest since mid-August, then pared its loss to 4.8% as of 9:30 a.m. in London, according to prices compiled by Bloomberg. The Bloomberg Galaxy Crypto Index slid by more than 11%, in a third day of losses. Rival coins Ether, XRP and Litecoin also retreated at least 10%.
“The global sell-off in equities has indeed spilled over to the crypto space,” said Ryan Rabaglia, head of trading with cryptocurrency dealing firm OSL in Hong Kong. “The days of crypto being the safe-haven play and having a high degree of detachment from the rest of the world are seemingly diminishing.”
Increased institutional attention on the cryptocurrency space has led to greater correlation with traditional assets, although this trend is not expected to last, he said.
“With the 2018 low of $5,800 being tested a number of times, our sights are set at that level for all further sell-offs,” Rabaglia said.
The biggest stock sell-off since February rolled from the U.S. through Asia Thursday, with benchmarks across the region tumbling at least 4%, and China’s Shanghai Composite set to close at an almost four-year low. Concern about the impact of the U.S.-China trade war, 10-year Treasury yields touching a 2011 high and the Federal Reserve’s monetary tightening are all contributing to market nervousness.
Cryptocurrencies have wiped out more than $600 billion in value from a January peak as the boom in initial coin offerings last year fades further into memory. Mainstream adoption of digital currencies has failed to materialize this year amid a series of exchange hacks and increased regulatory scrutiny.
“It is clear by now that Bitcoin and other cryptocurrencies represent the mother of all bubbles,” Nouriel Roubini, chairman at Roubini Macro Associates and a professor at NYU Stern School of Business, said in prepared testimony for a U.S. Senate Banking Committee hearing on cryptocurrencies and blockchain scheduled Thursday in Washington. “No asset class in human history has ever experienced such a rapid boom and total utter bust and implosion.”
In a scathing testimony, Roubini argued the blockchain technology that underpins Bitcoin and other cryptos is “the most over-hyped and least useful technology in human history” and “nothing better than a glorified spreadsheet or database.”