Bitcoin (BTC) is often compared with Gold, which has always been a reliable asset that does not show any correlation to the traditional markets. Due to its decentralized nature, BTC has been acting as a hedge in times of financial uncertainty. People looking to put their wealth away from traditional markets and currencies have easier access to Bitcoin than they do to Gold.

The flagship cryptocurrency is now being put to the test as the global economy is becoming extremely volatile due to the corona outbreak. The VIX volatility index, the traditional market’s leading risk indicator, touched 55 on March 9, hitting the highest levels since 2009.

Russia – Saudi oil war

Meanwhile, Russia’s refusal of Saudi Arabia’s deal that wanted to cut-off production of oil to 1.5 million barrels per day saw Saudi cutting off oil prices for China by almost $7 per barrel. This followed the nation boosting its oil production by 2 million barrels. This has led Brent Crude, the international oil benchmark trading at $36.20, down 20%.

Bank of England and Federal Reserve rate drop

Now, according to the Financial TImes, The Bank of England (BoE) has followed the Federal Reserve in cutting its interest rates. This was the highest interest rate drop since 2009. The new BoE base rate is just 0.25% now after a reduction of 0.5%. While The Federal Reserve rate is now 1.25%. The Bank noted:

“The reduction in Bank Rate will help to support business and consumer confidence at a difficult time, to bolster the cash flows of businesses and households, and to reduce the cost and to improve the availability of finance.”

Many in the crypto community believe that boosting spending and borrowing among people by cutting interest rates is one of the reasons why fiat currency would lose its value someday. These are just the government’s efforts to avoid economic recessions.

Major markets take hits – Corona panic

Adding to this, The Dow Jones Industrial Average dropped 6.9% undergoing its most significant daily loss ever recorded, while the UK’s FTSE was down 7.7%. Asian markets are suffering as well, as Japan’s Nikkei closed down 5.1% below Friday’s close.

This is all amidst growing Coronavirus fears to the global market, and how this outbreak could affect the price of Bitcoin. The sharp drop in price earlier this weekend has mostly been linked to the rapid spread of the deadly virus. $3.6 trillion in crypto value and $48 billion were wiped out from the stock and crypto markets, respectively.

Bitcoin is down 13% in 48 hours, testing its lowest level since early January at $7,750. However, Gold prices remained flat over the day at $1.673 per ounce after reaching a historic high at $1,700 last night. The commodity is up 5.6% in March, displaying a healthy performance.

Bitcoin investors were taken aback

Bitcoin has surprised many crypto enthusiasts as past events have recorded growing BTC use during times like these. Brian Armstrong, co-founder, and CEO at Coinbase expressed his shock on twitter stating:

“Surprised we’re seeing the Bitcoin price fall in this environment, would have expected the opposite.”

John Bollinger, inventor of the Bollinger Bands trading indicator, on Tuesday said that the recent downward rally is unexpected. He tweeted.

“Bitcoin fell victim to the COVID-19 panic. I truly did not see that coming, I thought it might act as a safe haven asset.”

The market capitalization of the entire crypto market is down more than $26.43 billion. Fears regarding the events are driving prices down. Apart from BTC, top altcoins like ethereum (ETH), XRP, and bitcoin cash (BCH), have all dropped percentage losses in double figures. The overall cryptocurrency market cap now stands at $222.2 billion, and Bitcoin’s dominance rate is 64%.