Bitcoin left many investors disappointed when it plummeted along with the stock market and other assets in a massive March coronavirus-induced crash, casting doubt over bitcoin’s ability to act as a so-called safe haven.
The bitcoin price quickly recovered those March losses and is now up around 30% so far this year—with global stock markets also rallying even against an increasingly bleak economic backdrop.
However, the influential chief executive of the world’s largest bitcoin and cryptocurrency exchange by volume, Binance, has warned bitcoin is still tied to the stock market and a future crash could send the bitcoin price lower.
“The stock market is probably a thousand times bigger than the crypto market,” Changpeng Zhao, often known simply as CZ, told Bloomberg this week.
“When that goes down, and a lot of people are losing a lot of money, many of those people who have crypto investments will want to convert those investments into cash. It has a drag down effect on asset classes, pulling them down.”
Bitcoin’s reputation as “digital gold” was knocked in March when the bitcoin price dropped more than half in under 24 hours, hard hit by panic sparked by the spreading coronavirus Covid-19.
“People should not take the description of bitcoin as a safe haven asset too literally,” CZ said, speaking to Bloomberg from Singapore.
Global stock markets, led by a near-50% surge in the U.S. S&P 500 since hitting recent lows in late March, have been driven by huge stimulus efforts from governments and central banks around the world in recent months.
The U.S. Federal Reserve cut interest rates to near zero in March at the beginning of the coronavirus pandemic and has since pledged billions of dollars to financial markets, businesses, and state and local governments.
Some have warned the recent rally won’t last, although CZ is confident that investors will eventually begin looking to bitcoin as risk rises.
“With so much fiat flowing around, the safe haven properties of bitcoin will come through over time,” CZ said.
For now, the bitcoin price has been trading around $9,000 per bitcoin since its supply squeeze in early May—with bitcoin volatility levels at their lowest since the fourth quarter of 2018.
“I don’t know what it’s going to take for bitcoin to break this,” CZ said, adding he expects the bitcoin price to break out “sooner or…