2018 has taught us many lessons. Maybe the most important is that Bitcoin actually is not a reliable store of value — not yet, at least. On the contrary, it is a very risky asset directly correlated with stocks.
[Editor’s Note: The following article is an op-ed and does not necessarily reflect the opinions of BeInCrypto or other staff members.]
Whether you are new to the market or a savvy veteran, you must have heard or read about the comparison between Bitcoin and gold. In fact, the expression ‘digital gold’ was widely used in 2018 when talking about the number one cryptocurrency in all kinds of environments, from mainstream media and technical blogs to the more trivial Twitter wars.
But is it really? Is Bitcoin a store of value just like gold is nowadays? Is it a safe haven when most risky assets collapse?
No matter what the crypto OGs say, 2018 has taught us one thing: Bitcoin is actually a very risky asset and has a strong correlation with other risk-driven financial instruments — like stocks for example, as we will show you in the next paragraphs.
What Started It All: The February Crash
Everybody remembers Dec 2017 and Bitcoin shooting the moon to almost $20,000. Jan 2018 was even better for the altcoins — from Ripple to Ethereum, Monero, Dash, and many more. Even the crypto meme Dogecoin reached $0.01 to start the year.
Coincidentally, on the US stock exchange during the same period, life was also good with S&P 500 — Standard and Poor’s 500, an index based on 500 of the most traded stocks on New York Stock Exchange and NASDAQ — reaching all-time highs.
After the new all-time high set on Jan 26 though, things got out of hand going into February. What followed was a 12 percent crash in less than two weeks.
Bitcoin, on the other hand, was way below the all-time highs but still in five-digit territory. After a green day on Jan 28, the cryptocurrency market started collapsing, with Bitcoin losing over 50 percent of its value in less than two weeks — if we take into consideration the Feb 9 flash crash.
Worth mentioning is that before the crash, during January, Bitcoin lost a lot of momentum — but still didn’t go below $10,000. The stock market sell-off triggered a massive crypto dump.
April 2018: New Lows
After the crash, both the stock and the cryptocurrency markets recovered for a short while. Bitcoin again reached five digits — only to dip to around $9,000 and below in March. S&P 500 had a similar chart with ups and downs, yet on March 22, the US stock market started bleeding heavily and retested the same lows as in Feb, during a three-week span.
On March 24, Bitcoin followed the S&P 500’s footsteps and retested the Feb lows, closing the first days of April under $7,000.
Again, a tough stretch for both assets, with the stocks leading the way and Bitcoin following shortly after.
The End-of-Year Bloodbath
After that short period, S&P 500 recovered strongly and even reached new all-time highs in Aug and Sep. On the other hand, Bitcoin price stabilized during the summer as trading volume faded away. The crypto community praised how Bitcoin was slowly developing into a reliable store of value and a viable alternative to gold. Once again, the community got too carried away.
On Oct 10, 2018, after a short pullback from an all-time high, the stock market collapsed violently and struggled all the way to this day to recover — erasing all profits from the last five months.
Surprisingly, Oct was a quiet month for Bitcoin. The only highlight was the green candle with a massive upward shadow on Oct 15. That didn’t last long, though, as the stock market was bleeding heavily. The cryptocurrency market started its way downwards in Nov — with massive losses and another 40 percent pullback for Bitcoin.
As of late, the market leader has been making new 2018 lows — struggling to recover, just like S&P 500.
Coincidence? Unlikely. This is just another obvious sign that investors treat Bitcoin & all other cryptocurrencies as a risk asset and definitely not safe haven — which means maybe, just maybe, you should reconsider your strategy when thinking of your crypto portfolio and adjust accordingly for 2019. It’s never too late, you know.