This intense selloff has come about as investors flee what are commonly referred to as “risk-on” investments, which encompasses equities and other assets that are especially prone to selloffs during economic turbulence.
Bitcoin’s close correlation to the global markets over the past week has seemed to confirm that, for the time being, investors do view it as a risk-on investment rather than a safe haven.
Because of this, the cryptocurrency’s CME futures volume is now collapsing, pointing to a massive degradation in investor confidence.
Bitcoin CME Futures Volume “Collapses” as BTC Struggles to Surmount Key Resistance
At the time of writing, Bitcoin is trading down just under 2% at its current price of $8,700, which marks a notable decline from daily highs of $8,900 that were set during a fleeting bid by bulls to recapture the crypto’s position above $9,000.
The firm rejection BTC faced at this level, however, seems to be a dire sign for buyers, as it points to underlying weakness that may mean the crypto is prone to seeing further losses in the near-term.
This bear-favoring price action has also led volume on Bitcoin’s CME futures to collapse, signaling that investors lack clarity as to which direction the crypto might move next, with its mid-term trend likely being guided by that of the global markets.
Alex Krúger, a prominent cryptocurrency-focused economist, spoke about this phenomenon in a recent tweet, telling his followers that the collapse in volume has come about in tandem with the global meltdown.
“BTC CME volumes have collapsed since the global markets panic started.”
$BTC CME volumes have collapsed since the global markets panic started. pic.twitter.com/OTsB8UNvJ4
— Alex Krüger (@krugermacro) March 3, 2020
Is All Hope Lost for BTC’s Safe Haven Narrative?
Although this recent price action has done significant damage to the “digital safe haven” narrative that many investors have previously subscribed to, it is important to note that one prominent industry figure does not believe that this narrative is void yet.
Brian Armstrong, the co-founder and CEO of Coinbase, explained in a recent tweet that interest rate cuts – like the 50bps one seen today – could actually bolster Bitcoin and the crypto markets in the future.
“A down stock market and interest rate cuts may lead to growth in crypto this year. Governments around the world are likely to look to stimulate the economy in any way they can, including using quantitative easing and expanding the money supply (printing money),” he said.
A down stock market and interest rate cuts may lead to growth in crypto this year. Governments around the world are likely to look to stimulate the economy in any way they can, including using quantitative easing and expanding the money supply (printing money).
— Brian Armstrong (@brian_armstrong) March 3, 2020
In spite of this optimism, Bitcoin still appears to be caught within a firm down market at the moment as investors continue treating it as a risk-on asset, which likely means it will see further near-term losses.
Featured image from Shutterstock.