There is no clear end in sight for the ongoing stock market meltdown. Today is seeing some of the worst price losses yet as coronavirus panic intensifies. Moreover, the crypto market is also taking a beating, with Bitcoin trading near $6,000.
Stock market crash pushes Bitcoin down to $6,000
The stock markets are in disarray today. At the time of writing, the S&P 500 is trading down over eight percent. Massive fears over the spread of the coronavirus is pushing the stock markets off a cliff into free fall.
Moreover, the cryptocurrency market is also seeing huge losses. Although Bitcoin is usually seen as a “safe haven” and a counter-cyclical asset, it is now facing massive sell-offs. It would appear that the current market panic is too great for large investors to objectively evaluate the situation.
In fact, even the price of gold – the de facto “safe haven” asset – is seeing losses of over two percent today. This suggests that investors currently feel “cash is king”, with the growing uncertainty over the global situation.
Large hedge funds are selling crypto
In addition to this, Bitcoin – and the crypto market – is also seeing sell-offs from large hedge funds. This is exacerbating losses in the crypto market, and has several reasons. The perhaps most counter-intuitive one is relates to a technical risk management metric.
Yesterday, we told you about the macro analyst Raoul Pal, who essentially argues Bitcoin was not falling “enough”. As such, hedge funds were suddenly holding too much “risky” Bitcoin in comparison to their crashing stock market assets.
Consequently, hedge funds with large crypto holdings had to liquidate large amounts of crypto in the past days. Another Libra Association member suggests that margin calls in the stock market also had a part in crashing the crypto markets.
Coronavirus panic is reaching its peak
Toshi Times has been reporting on the COVID-19 coronavirus since it first began in Wuhan, China. Although blockchain and cryptocurrency firms were quick to rally in the fight against the coronavirus, efforts to contain the virus were unsuccessful.
The COVID-19 coronavirus has now spread to all continents except Antarctica. What’s more, the situation is quickly devolving. Earlier this week, Italy put a nationwide quarantine into effect. Yesterday, Donald Trump also said that the US would suspend all flight to and from Europe.
It remains to see how this situation continues to unfold. It would appear that a reversal in stock market prices would also spread to the crypto market, as the recent crash did. At the same time, it is also possible that investors will realize that the fundamentals of major crypto remain the same and begin pumping funds into the crypto market again.
Rasmus Pihl is a writer for Toshi Times by day and an avid follower of the blockchain industry by night. Rasmus holds a Bachelor’s Degree in Marketing from the Gothenburg School of Business, Economics, and Law and runs a Swedish marketing consulting firm. Moreover, when he isn’t writing for Toshi Times, traveling, working or changing the world in some other capacity, Rasmus is more than likely caught up in postgraduate studies.