Bitcoin remained highly volatile Friday – even as the stock market posted a solid rebound.
The price of one bitcoin (XBT) fell 3% in early morning trading to about $5,600 before recovering a bit. At one point Friday morning, prices had plunged as low as $3,850.
Bitcoin has plummeted 30% in just the past week. The cryptocurrency was trading above $10,000 only a few weeks ago.
Many investors have viewed bitcoin as a way to protect themselves from interest rate cuts by central banks like the Federal Reserve, ECB and Bank of Japan.
When banks are slashing rates, like they are now, that tends to weaken the value of the paper currencies that governments print.
But the market turmoil from the global coronavirus outbreak has turned everything on its head.
The prices of other top cryptocurrencies, such as ethereum, XRP, litecoin and EOS, have all plummeted as of late too.
Meanwhile, gold has rallied. It often tends to do well during times of intense fear as investors appreciate the fact that this a physical asset with tangible value. Gold prices are up more than 3% this year.
“Bitcoin has always been touted as digital gold and considered as a safe haven asset. A safe haven asset is usually popular amid investors during…turbulence…but lately, we have not seen this at all,” said AvaTrade chief market analyst Naeem Aslam in a report Friday morning.
Aslam said that the fact that bitcoin had been surging up until just a few weeks ago is the main reason it is getting hit so hard now.
He noted that many investors in stocks are dumping assets that had been doing well to lock in gains and pay back loans they used to buy stocks.
Investors may need to take further profits in bitcoin to avoid a margin call from brokerages that would force them to sell even more assets, Aslam said. He thinks bitcoin could fall back to about $2,630, which is where it traded in August 2016.