Bitcoin finds a bottom as risk aversion grips global markets
What’s supposed to be the most volatile asset in the universe is proving to be a bastion of stability compared with wild swings and carnage in global equities this week.
Bitcoin clawed its way back from the four-month low of $5,922 it touched Tuesday, rebounding almost 45% to $8,500. The Standard & Poor’s 500 index and the Dow Jones industrial average each fell more than 5% this week, wiping out gains for the year. Emerging markets stocks and currencies also plunged, while shorter-maturity U.S. Treasuries climbed as investors fled from risky assets to safer havens.
Bitcoin’s supporters are quick to extol the cryptocurrency’s virtues as an asset that’s uncorrelated to the broader market — independent from any single country, company or central bank — which can serve as a haven in times of market turmoil. And although that turmoil can usually be found in bitcoin prices and headlines, this week U.S. equities are beating the largest cryptocurrency on that field.
Since its drop below $6,000, bitcoin has been on a steady climb, causing volatility measures on the digital asset to stabilize while the sell-off in the S&P 500 triggered the Chicago Board Options Exchange Volatility Index’s biggest jump ever.
The “do no harm” approach to cryptocurrencies taken by U.S. regulators at a Senate hearing Tuesday sparked the rebound, while negative headlines from regulatory crackdowns in China and South Korea that have weighed on prices subsided.
The 70% slump from Bitcoin’s high of almost $20,000 has prompted finance heavyweights to say the cryptocurrency bubble had popped. Judging from price action this week at least, maybe those calls were premature.
Russo writes for Bloomberg.