The main reason is the spread of panic in the epidemic situation, triggering the instinct of capital risk aversion, and the stampede of large-scale risk aversion selling. In addition to this, there are four important factors that contributed to the unprecedented fall of bitcoin.
First, the market has a wrong expectation on the property of special currency.
For a long time, bitcoin has been regarded as digital gold, as a haven when the market is in turmoil. This illusion has been shattered by the extreme test of the market. Bitcoin is not only a safe asset, but also a huge source of risk. In this case, the huge anxiety and consternation of the holders are multiplied on the panic caused by the epidemic, resulting in capital flight and stampede. Digital currency is more of the alternative financial products in the classification of financial assets, and it can't escape the impact of financial market liquidity tension.
Second, the digital currency represented by the bitcoin has no anchored value basis.
So far, no one in the world has been able to put forward a convincing pricing basis for bitcoin. The real value of bitcoin is still in the clouds. For example, oil, real estate and Maotai stock, as mature investment products, have recognized pricing basis and can calculate their intrinsic value. Even though their prices fluctuate up and down under the influence of extreme external environment, they are still floating around the value. If the price is significantly lower than the value, many long-term value investors will choose the opportunity to buy, and vice versa. It's like the coming of a big storm on the sea. Even if a ship with an anchor shakes heavily, it will not be swept away by the storm, because the anchor is involved. Bitcoin is a ship without an anchor. Where the wind and waves blow, the ship will be blown.
Third, the practitioners of digital currency is relatively young and have not experienced the baptism of the real financial storm.
The digital currency is the paradise after 90. Most of them haven't experienced major financial turmoil in person: the 87-year stock market crash in the last century, the economic crisis in Southeast Asia in 90s, the NASDAQ bubble in the beginning of this century and the 08 financial crisis. People who have experienced these storms will understand that in extreme cases, many common principles may become paradoxes. For example, gold is recognized as a tested hedge asset, but in extreme cases, due to the liquidity collapse caused by panic, gold will be sold into cash and treasury bonds. In several financial crises, gold also fell sharply, let alone bitcoin.
Fourth, digital currency derivatives have developed rapidly in recent two years.
Highly leveraged capital lending and numerous derivatives exacerbated the market's volatility. Most derivatives investors, not to hedge the spot risk, but to use small and broad, so in the extreme situation of the market, the volatility will be greatly enlarged by leverage.
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