Bitcoin has again taken a sharp turn for the worse with the major cryptocurrency erasing all of its promising gains made through January and February. The price of the coin suddenly broke from around $7,300 to under $6,000, on Coinbase in a matter of minutes before suddenly spiking back up another $700 as the globe continues to feel the economic pinch of the Covid-19 outbreak.
The price continues to rollercoaster up and down and is hitting massive volatility.
Bitcoin has been shedding value since it topped a $10,400 high in February, following weeks of steady gains and promising growth ahead of the May date for the Bitcoin mining reward halving. However, as the Covid-19 fears started gripping the markets and the global community, Bitcoin was not immune.
While many would have pegged Bitcoin to be a safe haven asset, it has not had a chance to prove itself in this global pandemic that has affected every possible market, including Gold, which is known as the ultimate safe haven asset. While Bitcoin could have operated as an anti-correlated asset against the traditional markets, it has not been given the opportunity to do so as investors in the institutional space shut up shop.
Major bloodshed for miners
The sudden drop in Bitcoin’s market is hugely concerning as it is a rapid fall, and one that is edging ever closer to a point where the mining of the coin may not be as profitable as many miners need. The threat of miner capitulation always looms in situations like this, but with the reward halving on the horizon, miners may be stuck in a difficult place.
This will no doubt send levels of panic around the cryptocurrency community, and even the mining community, who will need to decide on the value of continually upholding the Bitcoin network in times of such low prices with only a few months to go before the rewards are cut in half.
As it has been for the last year at least, the mining effort has been steady and continually on an upward curve ahead of the halving, there have also been advancements in mining equipment which does provide some optimism for the community as profitability levels are probably much more robust.
Covid-19 at the heart
While there is no reason for Bitcoin to be affected by the Covid-19 outbreak — there are no stock market floors, or physical cash that needs cleaning — the collapse of the market is no doubt indirectly linked to the general market uncertainty and the fear in traditional and cryptocurrency investors as a whole.
Institutional investors will be backing away from Bitcoin — always seen as a risky investment — while the cryptocurrency community would have been weary following two bouts of downward trends since the end of February. Now, this massive capitulation will surely send the market into full panic mode.