Down 26%: Bitcoin Sees Worst Sell-Off in 7 Years as Coronavirus Spurs Flight to Safety

Bitcoin suffered its biggest drop in seven years, as fears over the spreading coronavirus triggered a new wave of selling in everything from stocks and junk bonds to cryptocurrencies.

AccessTimeIconMar 12, 2020 at 4:05 p.m. UTC
Updated Sep 14, 2021 at 8:18 a.m. UTC

Bitcoin (BTC) suffered its biggest drop in seven years, as fears over the spreading coronavirus triggered a new wave of selling in everything from stocks and junk bonds to cryptocurrencies. This came despite a new European Central Bank pledge to pump more cash into panicky markets.  

Prices for the largest cryptocurrency by market value plunged 26 percent to $5,863 as of 13:54 UTC (9:54 a.m. Eastern time). The move wiped out bitcoin’s gains for the year, dropping prices to the lowest level since May 2019. At least for now, it has undermined the investment narrative that the cryptocurrency was starting to become a safe-haven asset similar to the traditional-market alternatives of U.S. Treasury bonds and gold.

“You’re getting to a point where markets are pretty frantic across the board, and today is a move toward cash,” said Kevin Kelly, lead analyst at the cryptocurrency-analysis firm Delphi Digital in New York. “Bitcoin and crypto in general still very much sit further out the risk curve in investors’ minds.”

Just overnight, bitcoin’s market capitalization slid by nearly $40 billion to about $107 billion, according to CoinMarketCap.com, a data provider. 

The stocks tumbled the day after President Donald Trump ordered a 30-day ban on visitors from Europe, to start later this week. The S&P 500 Index of U.S. stocks slid 7.7 percent.

Investors appeared to seek safety in U.S. Treasuys, with yields on the 10-year note dropping by 0.15 percentage point to 0.67 percent, close to a historic low. Bond yields fall when prices rise. 

Not soothed by ECB

A widely anticipated meeting by the European Central Bank, led by President Christine Lagarde, did little to assuage investors’ anxiety, even as the monetary policymakers approved plans to pump liquidity into markets, with a pledge to buy an additional 120 billion euros ($134 billion) of bonds and assets over the rest of the year. However, the ECB did not cut interest rates. 

Thursday’s sell-off in bitcoin extended across the cryptocurrency landscape, with ether (ETH), XRP (XRP) and litecoin (LTC) each tumbling in synch. 

“If bitcoin's going to sell off by 25 percent, everything that is even more speculative is going to sell off as well, and that’s what you're seeing today among the major digital assets,” said Greg Cipolaro, co-founder of Digital Asset Research, a cryptocurrency analysis firm in New York. 

Bitcoin’s price decline led to the liquidation of more than $700 million of futures contracts and other leveraged positions on BitMEX, a cryptocurrency exchange based in Seychelles, according to the research firm Skew. 

Denis Vinokourov, head of research at the London-based digital-asset firm Bequant, said at least $500 million of bitcoin futures contracts had been liquidated on cryptocurrency exchanges, leading to additional selling pressure and exacerbating the price decline. 

The most-recent data from the Chicago Mercantile Exchange showed traders categorized as “other reportables” — those that aren’t classified as asset managers or leveraged funds — had become “long,” or unusually loaded up on contracts designed to profit from price increases.

“We were due for a bit of a squeeze,” he said.  

With reporting assistance by Omkar Godbole.

CoinDesk - Unknown

Chart showing bitcoin's biggest plunge since 2013 amid coronavirus fears. Source: TradingView

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Trending

1
CoinDesk - Unknown
Opaque Platforms and Intertwined Protocols Pose Big Risk to Crypto

Second article in a series about risks we’re thinking about during these crypto down days.

CoinDesk - Unknown
2
CoinDesk - Unknown
Putin Weaponizes Inflation

Examining a recent propaganda speech from the Russian leader.

CoinDesk - Unknown
3
CoinDesk - Unknown
Morgan Creek Is Trying to Counter FTX’s BlockFi Bailout, Leaked Call Shows

FTX’s $250 million credit facility offer – if inked as initially proposed – stood to effectively wipe out all BlockFi shareholders, including Morgan Creek Digital, the firm told its investors.

CoinDesk - Unknown