Bitcoin recently joined the ranks of safe haven assets, according to Chris Reinertsen, Chief Marketing Officer of Rhythm Technologies.
Safe haven assets are assets where investors park their cash at time of rising global uncertainties, as they flee risky assets like stocks.
Traditionally, US Treasuries, gold, and the Swiss Franc have been considered safe haven assets. And more recently, so has Bitcoin.
At least, that’s what seems to have been the case in recent weeks as the US-China trade war raised global uncertainties, says Reinertsen. “The devaluation of China’s yuan has just hit an 11-year low against the dollar,” he says. “There is a flight of capital to safe-haven assets across the board, which now includes Bitcoin. Throughout the last few years, we have been seeing the trend of Bitcoin increasingly becoming fundamentally correlated to more macro moves as increased economic uncertainty in the world increases.”
Safe-haven asset performance as of 8/5/2019
Kirill Bensonoff, CEO of OpenLTV, agrees. “I believe that Bitcoin is becoming a "safe haven" asset similar to gold,” says Bensonoff. “While the correlation has not been fully established yet, we saw a major market downturn yesterday, while Bitcoin rallied. I believe we are going to see more capital flight to Bitcoin in the near future.”
Still, not everyone thinks that the buying into Bitcoin following the yuan devaluation against the dollar is a prudent investment strategy. Keith Hilden, Founder of Relex Capital, is one of them. Hilden thinks that the recent spike in Bitcoin prices is rather an act of speculation, as markets try to find their equilibrium point. “The recent devaluation by China's PBOC has shown the willingness to act in order to normalize external economic pressures impacting its economy, yet the tremors of such a forex move was felt in equity and currency markets around the world-- with the coming aftershocks yet to have occurred,” he says. “Economic energy expended by way of markets looking to regain back a sense of equilibrium is not harnessed, and instead lost to speculation, causing even more economic turmoil in the process until normalization is again achieved.”
Regardless of recent analyst opinions, conservative investors should be very cautious in pouring money into a “store of value” with an enormous volatility like Bitcoin.
Safe haven assets are assets where investors park their cash at […]
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