Bitcoin finds a bottom as risk aversion grips global markets

by BLOOMBERG

NEW YORK • What’s supposed to be the most volatile asset in the universe is proving to be a bastion of stability compared to wild swings and carnage in global equities this week.

Bitcoin clawed its way back from the four-month low of US$5,922 (RM23,332) it touched last Tuesday, rebounding almost 45% to US$8,500. The S&P 500 Index and the Dow Jones Industrial Average both fell more than 5% last week, wiping out gains for the year. Emerging markets stocks and currencies also plunged, while shorter maturity US Treasuries climbed as investors fled from risky assets to safe-havens.

Bitcoin’s supporters are quick to extol the cryptocurrency’ virtues as an asset that’s uncorrellated to the broader market — independent from any single country, company or central bank — which can serve as a haven in times of market turmoil. And while that turmoil can usually be found in Bitcoin prices and headlines, last week US equities were beating the largest cryptocurrency on that field.

Since the drop below US$6,000, Bitcoin has been on a steady climb. The “do no harm” approach to cryptocurrencies taken by US regulators at a Senate hearing last Tuesday sparked the rebound, while negative headlines from regulatory crackdowns in China and South Korea that have weighed on prices subsided.

The 70% slump from Bitcoin’s high of almost US$20,000 has prompted finance heavy weights to say the crypto bubble had finally popped. Judging from price action last week at least, maybe those calls were premature. — Bloomberg