Crypto currencies lose $21 billion in total market cap

Illustrative photo.

Cryptos are plunging along with global risk assets as BTC and other coins drop by more than 10 per cent over the last 24 hour session. Bitcoin dropped by almost 14 per cent at one point of time since yesterday's high levels as the current fall clearly demonstrates the fact that cryptos are not immune to the current convolution in the global markets. 
Crypto market has lost around $21 billion in total market cap during this weekend. As coronavirus fear rattled the global market, the overall crypto market has fallen apart. Among the list of Crypto currencies, BTCUSD dropped 22.94 per cent, ETHUSD dropped 3.03 per cent, XRPUSD dropped 1.54 per cent and LTCUSD dropped 5.97 per cent. 
Yury Safronau, chief technical analyst at AtoZ Markets, said: "As per short-term overview, the impact of global economy is very indecisive but bitcoin is currently trading like a risk on asset. Despite having negative correlation earlier, crypto market may continue to fall in tandem with the stock market and other leading assets apart from Gold."
Safronau opines, as per long-term perspective, current global economic breakdown may not going sustain so long. The major driver of current economic crisis is the Coronavirus. While gold managed to sustain momentum, Bitcoin and other cryptos failed to get a piece of it. The long-term bullish bias is still in the market which may help price to climb higher in the near future but a definite floor around the corner is still missing for the crypto market currently.
Vijay Valecha, chief investment officer at Century Financial, said: "Downfall in bitcoin is something markets are extremely concerned about. Fall of entire universe of risk assets has traditionally always bought some demand for crypto buying. Further fall in cryptos along with risk markets is likely to completely negate its image as a safe haven during times of turmoil. Crypto market cap has declined by $ 25 billion since last week's high with BTC dominance increasing to 63.5 per cent."
Despite multiple major cryptocurrency prices posting significant losses, the safe bet continues to be Bitcoin, 'bet' being the operative word - however even Bitcoin isn't immune to a dip!  Sunday's crypto wobble certainly surprised many traders worldwide. 
"Bitcoin remains a solid long term crypto investment however.  Being the category king means it will stay the course and rise again. While the readers of this article watch the crypto markets eagerly, in parallel a spotlight should be shone on the clear and present danger of an oil price war. This, coupled with the coronavirus fall-out could result in a cross-markets sell off," said Michael O'Loughlin, global finance & technology thought leader, and managing director at Token, inc.
This is a big test for bitcoin and after initially responding well it has now come under a lot of selling pressure. "In times of global panic and fear, which has been brought about by social media and the media, all risky markets go into panic sell mode. We have not seen this kind of scenario since the 08/09 financial crisis and bitcoin was still in its infancy," said Saeed Al Darmaki, chairman of eGovern.
"I still believe in the long term fundamentals of bitcoin as an asset. At the moment not many large institutions are investing in bitcoin or crypto assets however in time when there are more institutional grade solutions for custody, regulatory and settlement risk this will change. Once that happens then bitcoin will be on a par or overtake gold as the safe haven asset. I would not be surprised if end of 2020 return for bitcoin exceeds most traditional assets including gold and it will not be the first time this has happened.
Global equity sell-off and decrease in crude oil prices usually results in investors seeking safe haven assets such as Gold, US Treasury securities and cryptocurrency that have low or negative correlation. The current trend indicate gold and bitcoin prices are up by over 10 per cent on a year-to-date (YTD) basis.
Arshad Khan, co-founder of Arabian Bourse,  said: " The US 10-year treasury yield rate decreased to a low of 32 basis points (0.32 per cent) today - a decrease of 83 per cent on a YTD basis from 1.92 per cent as of December 31, 2019 - and consequently higher US Treasury bond prices. This shows preference of investors for safe haven assets such as gold, bitcoin and US Treasuries. Today's decrease in bitcoin prices is a knee-jerk reaction to the global sell-off amidst requirements to meet margin call for leveraged positions. Gold is also almost flat today in spite of the global equity and crude oil price sell off. Bitcoin and other crypto currencies are aligned with Gold prices and provide an alternative as a safe haven asset class."
Deepak, bitcoin enthusiast, explains that Bitcoin and crypto markets are open 24/7 unlike most traditional stock exchanges. There are no lower and upper circuits. So, this is one of the most open, decentralised markets in the world. 
"Traditionally, bitcoin has not shown any correlation with any other asset classes like gold, S&P etc.If you have a very short risk horizons (less than a year), bitcoin may not be suitable to you. Bitcoin should not be evaluated bitcoin purely as an investment avenue, it is disruptive to currencies as well as payment mechanisms.There is an uptick in bitcoin in countries affected by currency devaluations; so there is some value there."
Taha Sajid, chief technical consultant at Limar Global Tech, said: "This is just a temporary phase, considering the current economic situation due to Covid-19, also the post effects of the FED stance of lowering the interest rates to sustain the commercial banks and business in this critical situation when there is a downfall of economic activities, so that they be encouraged to take loans. However the commercial banks, other business needs to play there role, make the right moves and if they will not be able to take advantage, then again people will be turning over to the Cryptos, making the demand high and increasing the price again. So it's a tricky situation, Crypto holders just need to wait and hold." - sandhya@khaleejtimes.com

Sandhya D'Mello

sandhya@khaleejtimes.com