Bitcoin’s role as a “safe haven” asset in turbulent times is looking more unlikely.
As the U.S. stock market saw its biggest drop since February on Wednesday, the largest digital currency dropped 6 percent along with it. Bitcoin, sometimes referred to as “digital gold,” and other top cryptocurrencies wiped out $13 billion of value in a matter of hours, according to data from CoinMarketCap.com.
Other top cryptocurrencies followed bitcoin’s lead, with XRP and ethereum both tumbling more than 10 percent. The downward moves came after the International Monetary Fund warned that cryptocurrencies “could create new vulnerabilities in the international financial system.”
Bitcoin proponents have billed it as a store of value, or “digital gold,” and a possible replacement for traditional currencies.
This week’s market plunge, and this year’s global turmoil, should have made ideal conditions for digital currencies to prove that. The Dow Jones Industrial Average closed more than 800 points lower Wednesday, its biggest loss since February, hurt by quickly rising interest rates and a rout in tech stocks.
While U.S. stock market has otherwise fared pretty well this year, government-backed currencies were dragged down by ongoing Brexit concerns in 2018, and there were growing trade tensions between the U.S., China and European Union.
Yet, the world’s largest cryptocurrency is down 55 percent since the beginning of this year and more than 67 percent since nearing the $20,000 mark in December. Regulatory crackdowns and news of hacks on global exchanges contributed to those declines.