[SINGAPORE] After a week-long rout that erased hundreds of billions in digital-asset value, Bitcoin has again failed to live up to its billing as a safe harbour asset.
Once cast as a hedge against market turmoil – a “digital gold” for the blockchain age – the original cryptocurrency stabilised on Friday (Oct 17) morning in Singapore after sliding alongside global equities and credit to hover near US$109,000, according to data compiled by Bloomberg.
Bitcoin had struck an all-time high of US$126,251 as recently as October 6. Days later, a record spree of liquidations sparked by escalating US-China trade tensions coincided with a sharp selloff that encompassed most major tokens. So far, the market has struggled to stage a lasting recovery, even as heavyweights including Kraken, Circle, BitGo and Ripple push deeper into regulated finance – seeking trust charters, payment rails and card products.
“What’s striking is the timing of the crash coinciding with major players pursuing banking licences,” said Rachael Lucas, analyst at BTC Markets. The pivot to traditional financial infrastructure “signals a strategic hedge against volatility, aiming to build legitimacy,” she added.
Risks stemming from the US and China sparring over trade continue to plague risk assets beyond crypto.
The collapses of First Brands Group and Tricolor Holdings have revived anxiety over hidden credit losses, while fraud-linked write-downs at Zions Bancorp and Western Alliance wiped more than US$100 billion from US bank market value in a single day.
With longstanding havens such as gold and silver continuing to hit fresh highs, Bitcoin has disappointed. It fell as much as 6.3 per cent in the week to Oct 12, the most since early March and hasn’t yet bounced back. The same is true of most cryptocurrencies.
“More than anything, I think crypto is acting like a canary in the coal mine suggesting the market is on edge because of emerging credit worries,” said Matthew Hougan, chief investment officer at Bitwise.
Going forward, US$107,000 is seen as a key support level for Bitcoin. A “decisive break below risks deeper downside,” Lucas said. BLOOMBERG
