Calming Bitcoin... Staying Around 62 Million Won

Risk-Off Sentiment Amid Previous Day's Bitcoin Plunge
Some Investors Step In to Buy Low... El Salvador Purchases 150 Bitcoin Units

[Image source=EPA Yonhap News]

[Asia Economy Reporter Gong Byung-sun] Bitcoin, the representative cryptocurrency that once fell to 56 million KRW, has rebounded and is now staying in the 62 million KRW range. Although risk-averse sentiment is spreading in the cryptocurrency market, some investors have started buying at low prices.

According to the domestic cryptocurrency exchange Upbit, as of 4:20 PM on the 5th, Bitcoin recorded 62.78 million KRW, up 0.94% from the previous day. The day before, Bitcoin had plunged by 17.71% at one point, falling to 56 million KRW, but has since shown signs of recovery.

The reason for the plunge the day before was investors' risk-averse sentiment. According to US economic media Bloomberg on the 3rd (local time), Liz Young, Chief Investment Strategist at US online financial company SoFi, said, "Investors view Bitcoin as a high-risk investment." If risk asset investment sentiment shrinks, they may sell cryptocurrencies.

Bitcoin has been evaluated as a safe asset similar to gold that can cope with inflation, but in reality, it shows a trend similar to stocks, which are another risk asset. Bitcoin recorded a 100-day correlation coefficient of 0.33 with the S&P 500. The 0.33 is the highest figure recorded this year.

The recent instability of risk assets is due to the possibility of interest rate hikes. On the 30th of last month, Jerome Powell, Chairman of the US Federal Reserve (Fed), told the US Senate Banking Committee, "The threat of inflation is continuously increasing," hinting at the possibility of an early end to asset purchase tapering. The tapering, originally planned to end next summer, is being moved up to spring. The market interprets the early end of tapering as meaning that interest rate hikes will also be implemented faster than expected.

Nevertheless, some investors seem to have taken advantage of the Bitcoin plunge as a buying opportunity, leading to the rebound. El Salvador, a Latin American country, is an example. On the 4th, Nayib Bukele, President of El Salvador, tweeted, "El Salvador bought during the plunge," and said, "We purchased 150 Bitcoins at $48,670 (about 57.57 million KRW)." This means about 8.6 billion KRW was used to buy 150 Bitcoins. Earlier in September, El Salvador adopted Bitcoin as legal tender.