Why this expert says Bitcoin isn’t ‘a safe haven asset’, at least not yet

Bitcoin (CRYPTO: BTC) is many things to many people.

Undoubtedly the world’s original crypto provides a means of storing or transferring money that’s outside the realm of traditional banks.

But crypto enthusiasts claims that it is akin to digital gold, a new virtual haven asset, have come under fire as the token has closely tracked risk assets in recent months.

Gold prices have largely trended higher as investors first worried about soaring inflation and rising interest rates, and then watched horrified as Russia built its forces around Ukraine and launched a full invasion.

Bitcoin, meanwhile, performed more in line with tech shares and other risk assets.

Haven asset or risk asset?

Gold has been used as a store of wealth for thousands of years, while Bitcoin only came into virtual life in the wake of the 2008 global financial crisis. So as it matures over the coming years or decades, its volatility and haven status may well change as well.

But looking at the past month’s performance, the token didn’t quite stack up to gold as investors scrambled for a safe place to park their wealth amid Russia’s military build-up on the Ukrainian border.

One month ago, Bitcoin was trading for US$44,142 (AU$61.138). On 24 February, the day Russia invaded, it had fallen to US$34,459, according to data from CoinMarketCap.

Now Bitcoin did briefly rally from there, partly on the back of news that cryptos were assisting the Ukrainian defence efforts, topping out at US$45,077.

Nonetheless it gave back those gains within days and is currently trading for US$39,330, down 11% over the month.

Gold, on the other hand, was trading for US$1,853 per troy ounce on 16 February. By 8 March it had soared to US$2,050 as bullion demand rocketed. While the yellow metal has since retraced to today’s US$1,917 per ounce, it still remains up 3.5% over the month.

What the experts are saying about Bitcoin

Those are the past month’s price moves for gold and Bitcoin.

So, what are the experts saying?

According to Nigel Green, CEO at deVere Group (quoted by The Australian):

The correlation between crypto and stock markets has been pretty solid over the last few months on both inflation news and geopolitical issues. But this might all change again. The digital gold fundamentals for Bitcoin remain unaltered – namely its limited supply.

If you’re not familiar, Bitcoin was designed with a cap of 21 million tokens. Though these can be split into satoshis, or a 100 millionth of a Bitcoin. To date roughly 19 million Bitcoin have been mined. And crypto analysts estimate some 3 million of those may have been lost already.

Anatoly Crachilov, CEO of Nickel Digital Asset Management also warns that cryptos have only very recently emerged.

According to Crachilov, “Investors should not view Bitcoin as a safe haven asset at the current early stage of its adoption curve. Bitcoin clearly behaves as a risk-on asset and will remain such until wider institutional adoption takes place.”

The post Why this expert says Bitcoin isn’t ‘a safe haven asset’, at least not yet appeared first on The Motley Fool Australia.

More reading

• Bitcoin price edges higher as potential European crypto mining ban flops
• 2 top cryptocurrencies to buy and hold forever
• Why Bitcoin, Ethereum, and Dogecoin dropped today
• Fancy getting your paycheque in crypto? You’re not alone
• The Bitcoin price is rocketing 8% today. What’s going on?

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Bitcoin. The Motley Fool Australia owns and has recommended Bitcoin. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/7ZP0Jum