Crash of a Generation

Major world events like SXSW have been canceled, and the NBA has suspended the whole season after a player was infected. Trump has banned travel from several countries in Europe, and big-screen celebrities Tom Hanks and Rita Wilson have tested positive.

In response to the dystopian atmosphere, investors are panicking and the cryptocurrency markets are leading stock markets down in a mass exodus from “risk-on” assets.

Crash of a generation

Over the last 24 hours, Bitcoin has fallen 47%, making it the worst-performing day since 2016 according to Market Science.

Since global markets began to collapse on 20th February, Bitcoin is now down almost 50%, the S&P 500 has fallen over 25%, and even the traditional safe haven of gold has slipped 2%.

The catalyst for the Bitcoin dump is the same as across other asset classes—extreme uncertainty around coronavirus spurring a global flight to cash.

Only a few weeks ago, Bitcoiners were celebrating safe-haven status after the price moved in tandem with gold in reaction to events in Iran. But now, the safe haven narrative appears to have been overturned, and even the bullish narrative around the halving has faded.

This changing sentiment is demonstrated by Google Trends, with searches for the term “bitcoin coronavirus” (shown in blue) now drastically outnumbering searches for “bitcoin halving” (shown in red).

The bulk of the Bitcoin selling appears to be driven by institutions, who are most likely to be seeking liquidity for margin calls in other asset classes.

As crypto investor Mike Novogratz points out, no asset is immune to being cashed out in times of crisis. "When things go from bad, to very very bad like they did last week, investors take leverage down as fast as they can," tweeted Novogratz. "They book profits to make up for other losses. Ouch."

This idea is supported by reports from exchanges, which suggest that retail traders only account for a small proportion of the sellers.

72% of orders on retail-dominated exchange Coinbase were buy orders during the crash, according to BitWiseInvest CEO Hunter Horsley, and 95% of transactions on British exchange CoinCorner were buy orders, tweeted CEO Danny Scott.

Meanwhile, on BitMEX, an exchange used by both retail and institutional traders, the price of perpetual swaps was trading up to 10% lower than spot — suggesting whales on the exchange were leading the Bitcoin price down.