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Bitcoin has been moving in tandem with risk assets like stocks and oil lately. (Photo by INA ... [+] FASSBENDER / AFP) (Photo by INA FASSBENDER/AFP via Getty Images)

While some analysts have repeatedly described bitcoin as a safe-haven asset, its ability to offer protection during periods of market turmoil has come into question as its price has moved in tandem with risk assets like stocks.

Recently, the worlds most prominent digital currency suffered some notable losses, falling close to 20% in a matter of days.

Stocks have also had a hard time, with major indices experiencing significant declines. The Dow Jones Industrial Average, a benchmark index containing the stocks of 30 large companies, fell more than 2,000 points today, its largest drop in history, according to the BBC.

Oil, a risk-on asset, also had a rough day, with U.S. West Texas Intermediate crude plunging more than 24%, CNBC reported.

[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.]

Amid these conditions, some bitcoin enthusiasts have started voicing doubts about whether the digital currency does indeed provide investors with safety during times of macroeconomic turmoil.

Analyst Viewpoints

When analysts were polled for this particular article, they provided a range of perspectives.

In an effort to explain the recent correlation between bitcoin and risk-on assets, some market observers pointed to a liquidity crunch, emphasizing that a lack of liquidity in stocks might cause similar problems in digital currencies, helping fuel losses in both asset classes.

Denis Vinokourov, head of research for London-based digital asset firm Bequant, spoke to this matter.

A liquidity event in equities will likely translate into worsening liquidity conditions in crypto because market participants will be forced to adjust their portfolios and deal with margin calls, alternative assets are unlikely to be prioritised, he stated.

The same goes for commodities such as oil and gold.

Further, Vinokourov stated that the current broader market and liquidity event was the main cause of bitcoins recent declines.

Michael Conn, founder and managing partner of financial services firm Quail Creek Ventures, offered a similar point of view, stating that gold and other traditional safe-haven assets have been selling off recently due to the liquidity crunch.

I still see BTC as a safe haven asset when the fundamentals come back into the market, he said.

Joe DiPasquale, CEO of cryptocurrency hedge fund managerBitBull Capital, agreed, stating that bitcoin is positioned very well to be a safe-haven asset.

He added that cryptos correlations are very dynamic as of now, shifting from equities to gold, depending on the prevalent situation.

The recent crypto sell-off, in tandem with global equities, merely represents a general risk aversion going into a possible economic crunch, and does not necessarily invalidate Bitcoin's safe-haven status, said DiPasquale.

Evan Kuo, CEO and cofounder of digital currency firmAmpleforth, provided a different point of view.

I don't think Bitcoin is yet a safe-haven asset, he stated.

I think its an uncorrelated risk asset, which is important to distinguish from a safe-haven asset.

To protect from losses, investors will likely first retreat into dollars and bonds, he added.

Later, if theyre looking to add risk thats uncorrelated with broader macro-factors they should consider Bitcoin due to its potential for appreciation.

Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether and EOS.

View post:
Is Bitcoin Really A Safe-Haven Asset? - Forbes

Bitcoin was born 12 years ago at the height of the last global financial panic, and was positioned as a safe haven from the machinations of centralized banks. Indeed, its inventor, Satoshi Nakamoto, posted in its genesis block a newspaper headline about the British government being poised to bailout the banks a second time.

So now would seem to be a pretty good test of Nakamotos marvelous monetary machine. Hows it doing?

If the events of the past few days are any indicator, not well at all. Cryptocurrencies including Bitcoin and Ethereum, have plummeted in line with the worlds stock markets. The industry saw a $26 billion loss in 24 hours, with nearly all cryptocurrencies experiencing double-digit losses. The meltdown in the crypto markets is every bit as bad as anything in the legacy finance world. (Well, perhaps not as bad as oil, which plummeted 27% today, after the collapse of Saudi Arabias oil-cutting alliance with Russia.

Was Satoshis whole blockchain-based vision just a mirage?

Not necessarily, say a number of economists and industry observers who spoke with Decrypt today. On the surface, the major blockchains appear to be roiled every bit as much as legacy financial markets. Yet, there may be reason for optimism. The meltdown could have been far worse, and funds will certainly start moving back into the more legitimate blockchains, as financial markets begin to stabilize, some say.

Most analysts believe that a safe haven is something investors can retreat to after the stormnot necessarily during it. When a fast-moving disaster settles in, investors try to immediately cover their short positions. That causes a nearly spontaneous hole in all markets, as investors big and small reflexively liquidate.

In times of extreme stress markets go haywire, models break, and traders are left with their instincts, Matthew Graham, CEO of investment firm Sino Global Capital told Decrypt.

But he emphasized that the expression in a crisis, all correlations go to one, popularized during the 1987 stock market crash, is open to interpretation: It is not meant to be a literal truth. Different types of assets will not necessarily move in lockstep.

Black Monday losses on major stocks, BTC is the green dot in the top right corner. (IMAGE: Reddit)

In a curious kind of way, the maturing of cryptomeaning its gradual acceptance by institutional investorshas made it vulnerable to the same forces as traditional markets.

You really can't expect it to behave in an uncorrelated fashion once "institutional money" owns it, since at that point it's just another thing to sell to raise cash,Joe Wiesenthal, business editor at Bloomberg, tweeted today. He said that correlation becomes inevitable for a time because disparate assets, some rapidly losing value, now share a common distressed owner.

Some say thats overthinking it a bit. Digital economist Paolo Tasca said that the crypto sell off was panic selling, plain and simple. No one really knows how much institutional investors had to do with it, versus Main Street retail investors.

Tasca, founder and executive director of the University College London Centre for Blockchain Technologies, pointed out that in the UK, as elsewhere, people are stocking up at the supermarkets as if preparing for a war. Rationing has been introduced, and anti-bacterial gel is selling on the black market for ten times the price.

People dont know what to do and they panic and draw liquidity from the market, he said. [Bitcoin is] anti cyclical so it should behave like a safe haven. But in this short period of hysteria, its likely that well see a lot of volatility. The volatility index is very high, he said.

Tasca also pointed out that in many cases, the fortunes of crypto companies are directly related to the same world as traditional finance markets. In other words, they are not islands unto themselves.

Ripples cryptocurrency XRP, for instance, is used in cross-border trading, and directly linked to fiat currencies. DeFi applications, which typically focus on peer-to-peer lending markets, are underpinned by stablecoins, and typically pegged to fiat currencies, such as the falling US dollar.

Not surprisingly, the funds currently deployed in DeFi smart contracts is also dropping fast, according to Mati Greenspan, founder of crypto analytics site Quantum Economics.

Total USD locked in DeFi. (IMAGE: Quantum Economics)

Its virtually certain that things will get worse before they get better. The extent of the Coronavirus is unknown, Likewise, we don't know whether, like the Spanish flu, it returns for a second, far more lethal season. For that and many other reasons, in the near term Tasca and others say that dabbling in crypto might seem as reckless as gambling with the rent money.

Hedge funds may want to reduce their exposure to the crypto market, which has higher volatility than the money market, Tasca said. In this period, they may prefer the money market rather than crypto market products."

Tej Parikh, Chief Economist, at the Institute of Directors, the UKs foremost organization for business leaders and entrepreneurs, agreed.

"The global economic shockwaves caused by the Coronavirus outbreak have jolted investors away from volatile equities, he told Decrypt. The very real, and uncertain, impacts of the pandemic on households and businesses will most likely see financiers run for traditional safe haven assets like gold and government bonds, while there will be some trepidation over how cryptocurrencies might perform, he said.

Edward Cartwright, Professor of Economics at De Montfort University, in the city of Leicester, UK doesn't believe that cryptocurrencies are a safe haven, but he told Decrypt that they may now seem less risky compared to the alternatives.

"If cryptocurrencies are seen as an asset that can insulate from the Coronavirus shock, and the almost inevitable slowdown in the world economy, then their price is going to go up," he said. "If, however, they are seen as avoidable risk at a time of uncertainty their price is going to go down. Evidence suggests that a recession makes investors less willing to take risks. So, I would not be expecting a flight to cryptocurrency. But, equally, I do not see any reason for a dramatic fall in price. "

Yet some say that once things settle down a bit, crypto could become a safe haven yet. We could be entering a transitionary period, with Bitcoin defining an asset class that behaves like a hybrid of technology stocks, and gold.

This is an insightful observation that I found true, especially during big market sell-off days when Bitcoin moves more with tech stocks then the gold-safe-haven trade, tweeted Gabor Gurbacs, CEO and digital asset strategist at VanEck/MVIS, a global asset manager.

Graham pointed out that the primary digital currencies actually fared surprisingly well this week.

In times of distress its only natural to have massive volatility, he said, noting that he was kind of pleased to see how bitcoin and ether performed in the meltdown. An unhealthy result would have been if BTC slipped below $6,000, he said.

Said Graham: With BTC and ETH still above the lows of late last year, at this point we see only a maturing asset class that is increasingly integrated with the rest of the financial world.

Even Tasca was somewhat bullish. "Generally, I think Bitcoin is still a safe haven. I dont think theres any reason to believe the contrary, he said. There is no signal that entering bear market or that the market will crash in 2020.

Volatility in the energy markets could impact the cost of mining, and, potentially, increase the concentration of mining pool capacity to keep business profitable, said Tasca. But the signs are that the evolution of Bitcoin will continue, despite some very rough times which may lie ahead.

Joseph Lubin, co-founder of Ethereum and CEO of ConsenSys, the Brooklyn-based incubator (which funds Decrypt), tended to shrug it off this week. In many ways, it was just another day in crypto.

The best way to express it: When the shit hits the fan, all correlations go to 1 or -1, Lubin said.

Go here to see the original:
Bitcoin can still be a safe haven, experts say - Decrypt

Bitcoin and cryptocurrency has been popping up in popular culture, television and movies for some time now.

Bitcoin references exploded after bitcoin and crypto's epic 2017 bull run, with mentions on U.S. rapper Eminem's album Kamikaze, on the animated cartoon comedy Family Guy, on the sitcom The Big Bang Theory, and way back in 2015, in the U.S. comedy-drama movie Dope.

Now, it's the turn of the The Simpsons, known as America's favorite family, to discuss bitcoinwith researchers at major bitcoin and cryptocurrency exchange Luno using The Simpsons' past predictions to calculate exactly when bitcoin might go mainstream.

The Simpsons, across a staggering 673 episodes, have covered topics from futuristic technology, ... [+] national politics, big business, and, now, bitcoin and cryptocurrency.

On a recent episode of The Simpsons, aired on February 23 and featuring The Big Bang Theory star Jim Parsons, cryptocurrency is described as the "cash of the future," and getting closer "each day."

The Simpsons is prolific in their coverage of different topics, causing friendly rival South Park to once complain all their ideas had already been done by The Simpsons.

Over the show's 30-year run The Simpsons have correctly predicted Donald Trump becoming U.S. president, the NSA spying scandal, Apple's FaceTime, smartwatches, and the Disney takeover of Fox.

Using these previously successful predictions, analysts at London-based Luno have calculated the average time from a Simpsons prediction to reality is 15.6 yearsmeaning we could expect bitcoin and cryptocurrency mass adoption by 2036.

"It seems the creators behind The Simpsons have a knack for picking up on things that seem out-of-this-world, and a way of portraying the impossible as part of day-to-day life," said Marcus Swanepoel, Luno's chief executive, adding he "wouldn't be surprised if theyve overshot their prediction slightly in this case."

"While the episode in The Simpsons calls cryptocurrency the money of the future, the idea is certainly not as far-fetched as some of the other predictions. In this case, crypto platforms are readily available, with digital currency already accessible and useful as a day-to-day payment and investment."

The Simpsons have called a number of big technology, business, and political events over the ... [+] years--will bitcoin be the next one added to the list?

The Simpsons featuring bitcoin, blockchain and cryptocurrency could itself help push on crypto adoption.

Public awareness has been a major driver of the bitcoin price, which ballooned through 2017 to around $20,000 per bitcoinup from under $1,000 at the beginning of the yearlargely due to so-called fear of missing out and investors jumping on the runaway bandwagon.

The bitcoin price has since fallen back, dragging most other major cryptocurrencies down with it, and is now trading at around $8,000.

See original here:
The Simpsons Correctly Called President TrumpDid It Just Predict When Bitcoin Will Go Mainstream? - Forbes

Yet again, bitcoin bulls arguing that the popular cryptocurrency is a flight to safety investment during times of stock market weakness have gotten some discouraging feedback during the coronavirus-driven market sell-off. The S&P 500 has experienced one of its sharpest drops in history in the past month, but bitcoin has performed even worse during that time.

There are plenty of reasons for investors to be seeking a safe haven for their cash these days given stocks are tanking and bond yields are at record lows. Unfortunately for bitcoin investors, it seems the market doesnt see bitcoin as a viable way to preserve value.

In the past month, the SPDR S&P 500 ETF Trust (NYSE: SPY) is down 17%. In that same stretch, the Grayscale Bitcoin Trust (OTC: GBTC) is down 23.9% and the price of bitcoin is down 20.9%. By comparison, the traditional flight to safety trade, gold, is performing well during the stock market sell-off. The SPDR Gold Trust (NYSE: GLD) is up 5.8% in the past month, including another 1% rally on Wednesday morning.

See Also: How To Play The 2020 Stock Market Crash: Like 1987, 2000 Or 2008?

Heres a look at the Portfolio Visualizer daily return correlation matrix for the SPY, the GBTC, the GLD ETF, the United States Oil Fund LP (ETF) (NYSE: USO), the iShares Barclays 20+ Yr Treas.Bond (ETF) (NYSE: TLT) and the iPath S&P 500 VIX Short Term Futures TM ETN (NYSE: VXX). The correlations are calculated based on daily returns since January of 2018.

The good news is that the numbers suggest that the GBTC bitcoin fund does have a relatively low 0.12 correlation with the SPY ETF. In fact, the GBTC ETF has even less of a correlation to stocks than the GLD ETF, which has a negative 0.18 correlation. The negative correlation likely comes in part by the fact that investors tend to buy gold on days of market weakness.

Those arguing for bitcoin being its own asset class would point to the fact that the GBTC has very low correlation to stocks, gold, oil, treasury bonds or even market volatility, according to the table.

Unfortunately, the correlation between bitcoin and the SPY is positive, whereas the correlation between gold and the SPY is negative. In other words, bitcoin prices tend to drop when stock prices drop and gold prices tend to rise when stock prices drop.

See Also:Boredom Is The Enemy? A Look At Bitcoin Since Peaking At $20,000

The point of a flight to safety trade is to find a stable place to park cash when stocks are falling. Unfortunately, bitcoin hasnt yet proven to be that place, and bitcoin investors have suffered even larger losses than stock investors over the past month.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Read more from the original source:
Bitcoin Is Still Failing As A Flight To Safety Investment - Benzinga