Bitcoin plunged Thursday, at one point dropping below $6,000 for the first time since May as a sell-off in cryptocurrencies became a rout amid wider market turmoil sparked by the coronavirus pandemic.
The largest digital currency at one point tumbled 27% to $5,705.31, though the drop eased slightly for it to trade down 24% at $6,013 as of 4:07 p.m. in New York, according to Bloomberg pricing. That’s the largest single-day drop since December 2013.
The wider Bloomberg Galaxy Crypto Index slumped 26%, with Ether, XRP and Litecoin also plunging.
The wild moves come as stock gauges globally slide into bear territory and credit cracks on fears the spreading virus will cause a significant economic downturn. The retreat threatens to undermine the argument from many of its advocates that bitcoin can be a haven in times of turmoil.
“Investors are moving out of any risky assets,” said Vijay Ayyar, head of business development at crypto exchange Luno in Singapore. “Even though bitcoin is compared to gold as a safe haven asset, it’s very under-penetrated and is considered more as a risky asset to hold at this point.”
Ashish Singhal, chief executive of CRUXPay, said, “Crypto prices are once again riding on the same panic wave as that of stock markets, which are the worst we have seen in a long time. Amid WHO declaring coronavirus as a pandemic, the global oil price war, and Trump suspending travel from Europe to the U.S., the world economy is taking a huge blow, and crypto seems to have been caught in this whirlwind.”
Technical indicators point to support around the $6,000 level, though the 14-day Relative Strength Index (RSI) broke below 22 to its lowest level since September. Assets are considered oversold if the RSI falls below 30.
In addition, the token also broke through the Trading Envelope’s lower limit, which could portend a relief rally to the mean as has happened after similar occurrences. The indicator smooths moving averages to map out higher and lower limits.
“The crypto markets are affected right now because BTC has been trading like it’s positively correlated with the equities market,” said Jonathan Leong, co-founder and CEO of BTSE, a financial technology firm. “If you compare the traditional markets to the BTC market cap of $140 billion, it is difficult to consider bitcoin as a safe haven at this time.”