While some analysts have repeatedly described bitcoin as a safe-haven asset, its ability to offer protection during periods of market turmoil has come into question as its price has moved in tandem with risk assets like stocks.
Recently, the world’s most prominent digital currency suffered some notable losses, falling close to 20% in a matter of days.
Stocks have also had a hard time, with major indices experiencing significant declines. The Dow Jones Industrial Average, a benchmark index containing the stocks of 30 large companies, fell more than 2,000 points today, its largest drop in history, according to the BBC.
Oil, a risk-on asset, also had a rough day, with U.S. West Texas Intermediate crude plunging more than 24%, CNBC reported.
[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.]
Amid these conditions, some bitcoin enthusiasts have started voicing doubts about whether the digital currency does indeed provide investors with safety during times of macroeconomic turmoil.
When analysts were polled for this particular article, they provided a range of perspectives.
In an effort to explain the recent correlation between bitcoin and risk-on assets, some market observers pointed to a liquidity crunch, emphasizing that a lack of liquidity in stocks might cause similar problems in digital currencies, helping fuel losses in both asset classes.
“A liquidity event in equities will likely translate into worsening liquidity conditions in crypto because market participants will be forced to adjust their…