Is Bitcoin A Safe-Haven Asset?
Leverate Technological Trading Ltd | Aug 14, 2017 09:14AM ET
As the price hits $4,100USD per bitcoin, can we conclude that there is an underlying driver behind cryptocurrencies’ meteoric rise that is related to the global hunt for safe-haven assets in a world of very low investor returns and extraordinary economic and geopolitical uncertainty?
Reviewing the literature online we find conflicting information. An article on Steemit finds that bitcoin and Chinese yuan are inversely correlated. The Chinese have embraced bitcoin as a way to hedge economic growth and circumvent government controls, flocking to it as the yuan depreciates.
An article in Coindesk recently explored the possibility that its recent spike is related to the search for yield but also its attractiveness as a disaster hedge. The article quoted Michael Moro, CEO of Genesis Global Trading who said that “"If I am a US investor, I am sure that there are plenty of other assets that would be viewed as safe before getting to Bitcoin. But if I am located elsewhere with more economic instability, Bitcoin may very well be one of the first options."
In contrast, Hacked.com believes that although it is an excellent store of value, it’s not a safe-haven asset at all. Its rise is based on a technological development and has no correlation to any other asset or market at this moment.
Over a period of only four years, holding cryptocurrencies would have made you a very rich individual. Its capital return (it bears no interest rate) has been astronomical and easily one of the fastest rising assets in the world. Although its prominence is likely related to global acceptance as a valid currency, than any desire to store value. Yet, looking towards the future, financial advisers may well recommend itBitcoina safe-haven asset, that is, once its price stabilizes.
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