Bitcoin has had a volatile week, suffering sharp price fluctuations as global macroeconomic uncertainty heavily influences investor decision-making.
The doubts that are gripping the markets have been evidenced by a notable decline in global bond yields, which recently reached their lowest in more than 100 years, according to Bank of America Merrill Lynch research reported on by MarketWatch.
Many traders have been spooked by concerns about the trade war between the U.S. and China, uncertainty surrounding the value of the Chinese yuan and worries about the potential of a no-deal Brexit.
Against this backdrop, bitcoin rose to more than $12,300 on Tuesday, August 6th, up close to 19% from its intra-week low of $10,366.33, reached during the evening of Friday, August 2nd, CoinDesk data shows.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Investors Seek ‘Safe Harbours’
The “whole system is volatile right now,” said Michael Conn, founder and managing partner of financial services firm Quail Creek Ventures.
As a result, people are “looking for safe harbours” “or perceived safe harbours,” he stated.
Fortunately for bitcoin, the innovative digital currency seems to be benefiting from the situation.
“Bitcoin is increasingly seen as a safe haven asset by investors globally,” said Nic Niedermowwe, cofounder and CEO of cryptocurrency investment manager Prime Factor Capital.
This development may represent a sea change, according to certain analysts.
“The tides are shifting,” said Paul Daniel, head of global sales at Boomerang Capital Inc.
“We think more and more people will begin to treat BTC as a hedge in times of uncertainty as it slowly steals the reigns of a store of value from gold,” he added.
An ‘Interesting Moment’ In The Markets
Evan Kuo, CEO and cofounder of digital currency firm Ampleforth, also weighed in the situation.
“In times of uncertainty, gold has historically been treated as a safe haven asset,” he emphasized.
“With Bitcoin, we’re looking at a really interesting moment in time — one in which an asset that has been uncorrelated with traditional assets for the past ten years (bitcoin) is beginning to take on the behavior of a safe haven asset (gold).”
However, not everyone seems confident that the digital currency is making this transition.
“I think we’re still too early in cycle to call it a perfect safe haven,” said Jonathan Kelfer, cofounder and CEO of fintech firm Velocity Markets.
“While programmatic money certainly has merit in the era of MMT, bitcoin faces a few headwinds as a global safe haven.”
“Institutions have regulatory concerns as well as imperfect on/off ramps to trade into and out of bitcoin in the size they require,” he stated.
“From the retail front I would argue that the masses are still wrapping their head around bitcoin 101,” added Kelfer.
Kelfer stated that going forward, “these two issues should correct themselves” if global volatility grows worse and “bitcoin continues to build a statistically uncorrelated track record.”
Disclosure: I own some bitcoin, bitcoin cash and ether.