Total market capitalisation of the digital asset stood at week high of RM1.1t on March 8, before plummeting to RM511.9b on March 13
By AFIQ AZIZ / Pic By BLOOMBERG
EVEN havens are infected by the Covid-19 pandemic, which has pushed cryptocurrency market to lose 54.7% or US$144.6 billion (RM618.89 billion) in market value last week.
Total market capitalisation of the digital asset stood at week high of US$264.6 billion on March 8, before plummeting to US$119.6 billion on March 13, data collected by Coinmarketcap.com showed.
The last time the market fell to such low was on Jan 24, 2019, with the market value stood at US$119.3 billion.
Bitcoin prices were slashed by almost half from a high of US$9,131 to a low of US$4,773, followed by Ethereum — the second-largest digital coin, which nosedived 58.8% to US$109.6. Meanwhile, Ripple dipped 45.8% to US$0.13.
Most of the top 30 cryptocurrencies saw their prices plunge by more than 40% on average last week, according to Coinmarketcap.com data.
Analysts speculate that the huge dip in cryptocurrency prices could be attributed to the market catching up to equity sell-offs amid Covid-19 fears, as well as it being a case of whale sell-off.
“It seems like it’s being done by some small groups of investors that hold large Bitcoin and other crypto positions, and they hedged it.
“They may use this event as means to grab derivatives and trade with crypto positions,” Tokenize Exchange CEO and CTO Hong Qi Yu told The Malaysian Reserve.
Cryptocurrency, mainly Bitcoin, is an alternative haven investment alongside the likes of more traditional assets like gold, giving it the title of “digital gold”.
Last year, Bitcoin prices spiked 5% in a week after the killing of a top Iranian general by US forces in Iraq that led to panic buying. Some experts also say Iranians have increased their Bitcoin buying in preparation for the “post-war” period.
However, the novel coronavirus, recently classified as a pandemic by the World Health Organisation, has yet to trigger panic buying of cryptocurrencies. Rather, the plunge in price per Bitcoin last week came as a shock to many.
Now is the best time for Bitcoin investors, as the decentralised digital currency is expected to rebound in the near term.
“Even though Bitcoin value has decreased, it’s done so at a lower rate than many other assets and the reduction came at a time where it had approached the US$10,000 mark, when some pull back was expected,” Luno Malaysia Sdn Bhd country manager Aaron Tang said.
“Looking at gold, we saw it slump to its lowest rate in over six years towards the end of February, only then to stabilise and increase. In fact, Goldman Sachs Group Inc has declared it as ‘immune’ to the coronavirus.”
Gold prices lost 7.2% last week, sliding from US$1,697 on March 8 to US$1,574 on March 12. Tang believes that Covid-19, of which there were 156,162 cases in 146 countries as at press time, will be the real test of whether Bitcoin will follow in the footsteps of gold.
“We do, however, need a few months to see if cryptocurrencies, particularly Bitcoin, will behave like gold in times of crisis. It is far too early to say; we need more time to assess the situation,” he added.
The coin is also expected to enter the halving process in May, whereby the production of Bitcoin is cut by half, hence multiplying the digital asset price to new highs.
After halving in 2016, the price of Bitcoin nearly hit US$20,000 in December 2017, compared to US$678.47 in January the same year.
“The best-case scenario is people recognising Bitcoin as a haven, or as an asset with returns — compared to every other asset that is losing value.
“If that’s the case, it will then become one of the world’s biggest asset classes in just a matter of months,” Tang said.
Luno Malaysia and Tokenize Exchange are digital asset exchanges that have been established as recognised market operators by the Securities Commission Malaysia.