Bitcoin Dives In Global Selloff

The global equity market meltdown has spilled over into the once red-hot cryptocurrency space, with major digital assets including Bitcoin, Ethereum and Ripple shedding billions in market value in a matter of minutes. The unexpected collapse in the digital currency sector follows a period of price stability for the highly volatile market, and may suggest that investors are less likely to view the assets as safe-haven bets moving forward. 

(See also: Bitcoin Will Become World’s ‘Single Currency’: Dorsey.)

Days of Crypto as Safe-Haven Play Fading

On Thursday, the biggest stock market decline since February shocked markets around the world, causing most benchmarks to fall by at least 3.5%. The drop was driven in part by mounting fears of global trade tensions, tightening monetary policy, and higher interest rates.  

Bitcoin, the world's largest cryptocurrency by market capitalization, is trading at around $6,174 on Thursday morning, 6.8% lower week-to-date. The cryptocurrency has gained 24.6% year-to-date (YTD), yet represents a near 69% plunge from recorded highs in December 2017 when the digital coin surged to just below $20,000. 

Ethereum, Ripple and Bitcoin Cash were hit even harder, crashing over 10% as of Thursday morning. Bloomberg reports that its Galaxy Crypto Index crashed 10% as of Thursday morning, as well, heading into a third day of losses. 

This morning's crashes mark a significant shift from how cryptocurrencies typically respond to periods of poor performance in the stock market. The cryptocurrency sector used to be viewed as a "safe haven," independent from the broader market. In recent months, however, Bitcoin and other digital currencies have seen their prices fluctuate more or less in sync with the stock market.

"The days of crypto being the safe-haven play and having a high degree of detachment from the rest of the world are seemingly diminishing," Ryan Rabaglia, head of Hong Kong-based trading and cryptocurrency dealing firm OSL, told Bloomberg in an interview. Rabaglia attributed the correlation between cryptocurrency and the broader market to increased institutional interest in the sector. However, the OSL market watcher predicted that may change moving forward.

“With the 2018 low of $5,800 being tested a number of times, our sights are set at that level for all further sell-offs," added Rabaglia.

While Rabaglia called blockchain — the underlying technology behind bitcoin and other cryptocurrencies — "the most over-hyped and least useful technology in human history," many on the Street remain bullish about the long-term prospects of the distributed ledger technology. 

(For more see also: Bitcoin May Fall By a Third in 2018: Study.)