Bitcoin plunges in value as coronavirus infects crypto market

The last few weeks have seen the coronavirus pandemic wreak havoc on global markets across the board, with equities, commodities and the currencies all seeing their fair share of turbulence.

Another casualty has been the original cryptocurrency, Bitcoin, which has seen its value in the last month plunge around 37% to US$6,254 in mid-afternoon trading on Monday.

While the price crash is relatively tame by Bitcoin’s standards, the crypto has suffered deeper and faster value declines in previous years, its tumble in line with the rest of the markets has raised questions around the claims of some that the digital coin could become a new ‘have’ asset similar to gold when investors look for safer places to park their cash.

“The years of classifying Bitcoin as a ‘store-of-value’ is really getting put to the test”, said Wayne Chen, chief executive of fintech firm Interlapse and co-founder of the Coincurve virtual currency platform.

However, Chen said it is “too early” to write the obituary for Bitcoin as a haven asset just yet, saying that as a concept the crypto as it can be used “as a global currency” and can be accepted by anyone as a form of exchange.

“If Bitcoin was used widely as a payment instrument, then we can certainly see it holding more value in crisis events”, he added.

Similarly, George McDonaugh, managing director of blockchain investment firm KR1 PLC (LON:KR1), has said that when ‘black swan’ event such as the recent week’s sell-off occurs, there is “rush for cash” and all asset classes are exposed to a downturn as investors scramble to offload their holdings.

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“It doesn’t matter what your asset is, if it’s sellable they [investors] will sell it”, he said.

However, McDonaugh added that all of that newly released cash will need to find assets to buy into once the dust settles, which could include Bitcoin with its reputation as a “new asset class”.

Lack of clarity could be the culprit

A possible reason behind Bitcoin having not yet been fully adopted as a haven despite its global payment potential, Chen says, is that the cryptocurrency and wider blockchain industry has “jumped too far ahead in developing advanced technology that the mass market simply isn’t ready to grasp”, and that the fundamental aspect of Bitcoin as a method of payment has not yet been made clarified to the wider public.

“People and companies talk about doing ‘things’ on the blockchain when the fundamentals of digital payments aren’t even established. This is the problem we are facing. Something as simple as using Bitcoin as a currency is being overlooked across the world”.

“The industry is bastardized into too many flavours when the fundamentals of Bitcoin are still fuzzy to many”, Chen said, adding that this confusion in the market “prevents the right type of adoption at a critical time”.

“Bitcoin started as a global currency for payments and we should all start there. It doesn’t have to be Bitcoin that achieves this, but it certainly needs to achieve the currency and payment adoption first”, he said.