Editor's note: Jimmy Zhu is chief strategist at Fullerton Research. The article reflects the author's opinions, and not necessarily the views of CGTN.

The recent surge in bitcoin and the drop in gold prices have increased the talks in the market that whether the digital coin would become more attractive than those traditional safe-haven assets like dollar or gold. 

From a fundamental perspective, the rally in bitcoin is mainly driven by the unprecedented central banks' liquidity injection and rising retail investors' enthusiasm. However, the price rally may pause in the near future as virus spreading starts showing signs of easing.

There are three reasons driving the rally in bitcoin prices. 

First, the U.S. Federal Reserve and other central banks around the world have pumped huge liquidity into their economies and financial markets. 

The unprecedented expansion of the Fed's balance sheet last March has not only channeled the cash into stocks and bonds, but traders also bought much of the alternative assets like bitcoin.

Second, some big companies are increasingly investing in cryptocurrency, which also increases the influence of bitcoin. Tesla revealed it had purchased around $1.5 billion of Bitcoin in January and plans to begin accepting the cryptocurrency as a form of payment in the future. 

Also, payment company Square purchased $50 million worth of bitcoin last October.

Third, many people are forced to stay at home as countries around the world aim to contain COVID-19. The U.S. retail trading volume has been surging recently as many not only trade stocks, but also seek markets where institutional investors are less involved, including those stocks like GameStop.

Bitcoin is another hot option for them. For markets lacking institutional investors, flows become much more important than the fundamentals. 

Looking ahead, central banks' monetary stimulus is expected to become more moderate as the virus shows signs of easing. Many retail investors would also gradually return to their "normal life." Both of these would have a negative impact on the bitcoin price. 

U.S. Treasury Secretary Janet Yellen said Monday night that bitcoin is highly speculative and is an "extremely inefficient way of conducting transactions, and the amount of energy that's consumed in processing those transactions is staggering." Bitcoin dropped as much as by 17 percent in Monday trading, hitting a low of about $47,900.

What defines safe-haven assets?

To a certain extent, some investors have also believed that bitcoin is gradually replacing gold as safe-haven or reserved assets. 

Data showed a clear inverse relationship between the price moves of bitcoin and gold. 

The gold price has been substantially falling since August last year, and it could be due to fewer uncertainties in pandemic and increasing expectation on inflation to rise from the fundamental perspective, but it's not likely that the drop in gold prices is because of the flows into bitcoin. 

To be considered as safe-haven assets, such as the Japanese yen and the U.S. dollar, they usually carry a negative correlation with the risk assets like stocks. 

The fact is that bitcoin has been surging with global stocks this year amid improving expectations on the global economic outlook, so it cannot be defined as a haven asset. 

If its move stays in line with stock market, it should be taken as a risk asset. 

Recently, rising U.S. bonds yields have triggered some stocks selling off as traders worry that the higher borrowing cost would affect the equities' valuation. If the correlation between bitcoin and stocks were held, some selling flows might appear in bitcoin as well.

Safe-haven assets are generally well known by the majority of investors, with great liquidity. From the perspective of bitcoin itself, it certainly has potential values to invest in, but most of the investors lack sufficient knowledge of it.

Furthermore, Bitcoin was designed around the principle of a finite supply of 21 million coins. That means there's a fixed upper limit on how many bitcoins can ever come into existence. 

The stock market is likely to face some headwinds in the near term as investors need some time to digest the higher rates environment's impact on equities' valuation. 

Having that said, bitcoin's status as a safe-haven or speculative asset could be proven very soon. It may continue to move in a similar direction to stocks because both of their prices are highly influenced by the rates and Fed's monetary stance.