Bitcoin's price volatility spiked in March, reaching its loftiest measure in more than six years. … [+]
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Bitcoin’s price volatility surged in March, rising sharply as the digital currency suffered severe losses amid a widespread sell-off in assets.
The digital currency’s 30-day volatility reached 167.24% on March 31st, its highest since January 2014, according to data compiled by asset manager Blockforce Capital.
In addition, 60-day volatility hit 122.95% on March 31st, its loftiest value since February 2014, additional Blockforce Capital figures show.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
These measures of bitcoin’s price fluctuations rose to multi-year highs as the digital currency experienced sharp drops, losing nearly 60% of its value in less than a week, CoinDesk data reveals.
The cryptocurrency fell to as little as $3867.09 on March 12th, after reaching an intra-month high of $9204.67 on March 7th, additional CoinDesk figures show.
Several other assets declined, with the S&P 500 Index losing more than 25% of its value between March 2nd and March 23rd, according to Google Finance data.
Gold, which has been repeatedly been compared to bitcoin, also depreciated, but not as much as the digital asset.
The precious metal fell as much as 13% during the month, dropping to as little as $1,467.40 on March 19th after reaching an intra-month high of $1,697.40 on March 8th, Markets Insider figures show.
“From early February to mid-March global equity, commodity, currency and crypto markets have all endured one of the most violent sell-offs in history,” said Nicholas Pelecanos, head of trading at NEM Ventures.
“This highly correlated move was caused by a massive liquidity crunch sparked by investors selling equities due to the economic fall out of the Covid- 19 virus,” he stated.
Is Bitcoin A Safe Haven?
As bitcoin lost value along with other assets, several markets observers voiced concerns about whether the digital currency is, in fact, a safe haven.
Investors have frequently flocked to the cryptocurency during times of geopolitical turmoil, helping drive its price higher.
However, bitcoin moved in tandem with stocks and gold during March.
Several analysts weighed in on these developments, commenting on the implications of the widespread losses assets suffered last month.
“We don’t believe the ‘BTC is a safe haven’ narrative has changed at all,” said Jeff Dorman, chief investment officer of asset manager Arca.
“Bitcoin can still be a hedge to the risks in the financial system (reckless government spending, banking crises, fiat devaluation) without being perfectly negatively correlated to stocks.”
He elaborated, stating that “risk can be measured in minutes, days, weeks or years, but in the case of Bitcoin, its safe-have status may be defined in decades relative to the loss of purchasing power from fiat currencies over time.”
“Over longer-time frames, digital assets remain completely uncorrelated to all other asset classes,” Dorman added.
Pelecanos offered a similar perspective, emphasizing that “in a liquidity event the correlation of every asset moves to 1.”
However, this phenomenon gradually wears off, at which point “Bitcoin begins to trade as an uncorrelated asset” once again.
Bitcoin’s ‘Unique Resilience’
“Like other asset classes, Bitcoin faced a significant shock with COVID-19 affecting the world and its economies,” said Catherine Coley, CEO of Binance.US.
“But that’s where the similarities end. We have seen a unique resilience in this asset class, an influx of new users, buoyed price action, and even new developments in the industry as the world continues to work from home.”
“The importance of a digitally accessible market that is resistant to government inflation has captured more attention now that the once-hypothetical use case has been made a reality,” said Coley.
Michael Poutre, managing partner of blockchain-focused hedge fund Terraform Capital, also spoke to bitcoin’s strength.
Recently, “Bitcoin has suffered in price because it is young and doesn’t have the ownership base that the other asset classes do, but that is changing,” said Poutre.
He described the digital currency as a “great investment” at its current price level, predicting that “12 months from now when we look back, Bitcoin will have been one of the best, if not the best, investments one could make right now.”
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether and EOS.
