While bitcoin (BTC) has climbed sharply from recent lows below $4,000, it’s still on track to end March with a double-digit price loss.
The top cryptocurrency by market value is currently trading near $6,440, representing nearly a 68 percent rise from the low of $3,867 registered on March 13. Even so, prices are still down 24 percent on a month-to-date basis.
If that loss is held through Tuesday’s close (00:00 UTC), it would be the biggest monthly percentage decline since November 2018. Back then, the cryptocurrency had tanked by 37 percent, according to CoinDesk’s Bitcoin Price Index.
It’s also the second straight month in the red for bitcoin after an 8.5 percent decline in February.
The cryptocurrency has registered double-digit losses in just two months out of the last 13. Meanwhile, the bulls have managed to produce gains of over 10 percent in five months over the same period.
Why the drop?
Bitcoin, often touted as a safe haven asset, dropped sharply in March despite the coronavirus-led risk aversion in the traditional markets. That’s likely because investors used the cryptocurrency as a source of liquidity.
When panic sets in the financial markets, investors tend to liquidate assets and hold cash, preferably the U.S. dollar, which is the global reserve currency.
Hence, it’s not surprising the dollar index, which tracks the value of the greenback against major currencies, has gained nearly 7 percent this month, according to data provided by the crypto derivatives research firm Skew. Gold, too, is reporting a month-to-date gain of over 6 percent.
There is general consensus in the market that bitcoin will regain poise in the second quarter, courtesy of U.S. monetary policies.
While the Fed has recently announced an unlimited easing program that will boost supply, bitcoin is set to undergo its miner’s reward halving in May. The process will reduce the daily issuance, or supply, of coins by 50 percent.
See also: Bitcoin Halving, Explained