Is Bitcoin an Alternative Asset? 24% Plunge in One Month

Sharp Decline Immediately After WHO Pandemic Declaration... Direct Impact on Global Stock Market Downturn

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[Asia Economy Reporter Minwoo Lee] As the novel coronavirus infection (COVID-19) was declared a 'global pandemic' and international oil prices plummeted, causing turmoil in global stock markets, the leading cryptocurrency Bitcoin is also struggling. This contrasts with its previous pattern of rising in price as an alternative asset whenever the stock market was unstable.

According to the domestic cryptocurrency exchange Upbit on the 12th, as of 11:20 a.m., the price of Bitcoin was set at 9.18 million KRW. It had nearly reached 10.98 million KRW on the 7th but dropped about 17% in five days. Shortly after the World Health Organization (WHO) declared COVID-19 a global pandemic around 2 a.m. that day, the price fell from the 9.4 million KRW range to the 9.16 million KRW range. Compared to the peak price of 12.04 million KRW on the 13th of last month before the widespread outbreak of COVID-19, this represents a sharp 24% decline in one month. The overseas situation is similar. According to CoinMarketCap, which tracks global cryptocurrency market conditions, Bitcoin's price fell from $9,140 on the 7th to $7,647 on the 12th.

This is a stark contrast to the previous atmosphere where Bitcoin's price rose during stock market downturns, being regarded as a kind of alternative asset like gold. Until the beginning of the year, as the trade war between the U.S. and China, Middle East geopolitical risks, and the outbreak of COVID-19 began, investment flowed into Bitcoin as an alternative asset. On the 13th of last month, it even reached a yearly high of $10,377. During international crises such as the U.S.-Iran military tensions, its price rose, earning it the nickname 'digital gold.'

The cryptocurrency industry is also perplexed. Brian Armstrong, CEO of the U.S. cryptocurrency exchange Coinbase, stated on his Twitter, "I am surprised that Bitcoin has plunged in this situation," adding, "I naturally expected the opposite to happen."

Experts are analyzing that cryptocurrencies led by Bitcoin can no longer be considered safe assets. Campbell Harvey, a professor of economics at Duke University, pointed out, "If Bitcoin had been a safe asset in the recent macroeconomic situation, its value should have been maintained or increased, but instead, the price plummeted by more than 10%." Nouriel Roubini, a prominent Bitcoin skeptic and the 'Doctor Doom' who predicted the 2008 global financial crisis and a professor at New York University, also criticized, "Bitcoin fell 8%, a larger drop than traditional assets," adding, "Bitcoin is not a good hedging tool."