Bitcoin’s first two and a half months of the new year have been very eventful. The cryptocurrency began the new year by quickly gaining in price and providing much optimism to the general cryptocurrency market as it managed to climb from $7,200 to $8,000 in the first week of January.

However, a series of drops from late February has seen much of those gains wiped out with the price of Bitcoin currently sitting at $7,700 — about $500 above where it rang in the new year. This fall from its year-high of about $10,400 has occurred over two substantial price dips with the latest taking the coin from $9,000 to the upper reaches of $7,000.

The reasoning behind this fall, after making such impressive gains in January and most of February is mostly undecided. However, the outbreak of Covid-19 and its continued presence around the globe may have some indirect effect on it.

Covid-19 has caused havoc in the traditional markets and seen the likes of the S&P 500 drop by 2,000 base points in a single day. Oil has also crashed in price due to a price war brewing in the Middle East, and even Gold has been susceptible to the uncertain market.

An indirect effect?

While Bitcoin is claimed to be an asset that is anti-correlated in nature, it’s two troughs since late February have come at times of heightened fear in the traditional markets. This may be coincidental, or there may be some sort of correlation — albeit indirect.

Bitcoin has often shown a negative correlation in times of financial uncertainty — this was apparent when the US and China were in the grips of a trade war — but it has failed to live up to its safe haven status this time around.

However, it may well be the next generation of investors that have been attracted to the Bitcoin market that are calling the shots. The Bitcoin market is now one with heavy reliance on institutional and traditional investors, in fact, individual investment does not seem to move the market that much anymore.

Thus, in this time of financial uncertainty, perhaps these investors are distancing themselves from Bitcoin, which is still seen as an investment for times of greed — not fear. Institutional investors know that when the markets are on the ropes, there is no good to be found in investing in risky assets. Even though Bitcoin has shown glimpses of being a safe haven, it is not proven to institutional investors, and thus they have been pulling away.

The next step?

It could well be that Bitcoin’s recovery from where it finds itself now will be delayed. The traditional markets are waiting for the Covid-19 fears to die down, but only once that has happened, and the markets are a little more bullish, will Bitcoin perhaps be met with institutional investment interest again.

