An Important Day in Financial History: March 9, 2020

March 9, 2020, is destined to be recorded in financial history. On this day, the U.S. stock market triggered the circuit breaker mechanism again, and the global financial market suffered a heavy blow.

Looking back at history, the U.S. stock market first triggered the circuit breaker mechanism on October 27, 1997, after its implementation in 1987, with the Dow Jones Industrial Average falling 7.18% that day, marking the largest single-day drop since 1915.

The recent crash of the US stock market is the result of multiple factors coming together, including the global spread of the COVID-19 pandemic, the presidential election primaries in the United States, and the plummeting oil prices. This storm swept across global stock markets, and the cryptocurrency market was no exception.

Bitcoin, known as "digital gold," has suffered a heavy blow, with its price plummeting from $9,170 to $7,680, a decline of nearly 20% in two days. The liquidation amount for futures trading on several major exchanges has reached nearly $700 million.

Analysts generally believe that, in addition to the factors mentioned above, the lack of liquidity in the global financial markets is also an important reason for this plunge. The actual amount of funds in the market is lower than expected, and the presence of a large amount of leverage makes the market very susceptible to a liquidity crisis.

In this case, the demand for hedging has surged dramatically. Investors are selling off stocks, withdrawing from the commodity futures market, and turning their funds towards traditional safe-haven assets such as gold, cash, and government bonds.

However, Bitcoin has not demonstrated the characteristics of a safe-haven asset as expected. Although it became one of the safe-haven choices for the local people during the Venezuelan economic crisis, in this global financial turmoil, Bitcoin failed to rise against the trend like gold, instead experiencing a significant decline.

In this regard, some senior analysts point out that the view of considering Bitcoin as a safe-haven asset may be overly optimistic. They believe that the Bitcoin market is relatively small and struggles to withstand a large influx of funds from traditional financial markets. Additionally, the high volatility of Bitcoin prices makes it unlikely for professional investment teams to use it as a hedging tool.

From a hedging perspective, Bitcoin is indeed difficult to compare with gold at present. In addition to insufficient market depth, mainstream investors' understanding and consensus on Bitcoin remains limited. Therefore, Bitcoin currently resembles a highly volatile risk asset, with its price movements highly correlated with market liquidity.

Nevertheless, this does not mean that Bitcoin can never become a safe-haven asset. As a relatively niche asset, Bitcoin is still evolving and improving. While it is still too early to call it a safe-haven asset, Bitcoin is undoubtedly one of the farthest and most promising candidates on the road to "digital gold."

Investors need to view the development of the Bitcoin and cryptocurrency market rationally. As time goes on and the market matures, the role and positioning of Bitcoin may change. However, at the current stage, investors still need to approach this highly volatile market with caution.