Cryptocurrencies have plunged into the generalized sell-off that hit hard the financial markets yesterday, after the decision by the European Central Bank to leave interest rates unchanged, despite the crisis caused by the corona virus at a global level, and the assumption of monetary stimulus measures by the Frankfurt-based institution considered completely insufficient by investors.
This could have been the day when Bitcoin and the other major alternative cryptocurrencies could have shown their safe haven status. A hypothesis supported by many analysts in recent months, when the degree of correlation with stock market performance seemed very small. So much so, that some theories were already developing on how to use Bitcoin as a portfolio risk diversification tool. The sinking of Bitcoin to about $6,000 (as of 5:04 GMT on March 12), equal to about -22.0% in a single day, and many other cryptocurrencies, including Ethereum and Bitcoin Cash, shows that these theories are, for the moment, flawed.
We will see in the coming days and months whether, after this emergency, the degree of correlation will return to that previously recorded. For the moment, the correlation is evidently positive. The sharp drop recorded in the last week, perfectly aligned with that of the stock markets, consequently raises doubts about the validity of Bitcoin as a safe haven and reopens the validity of the positions of those who consider it more a speculative asset.