Why did many people stop viewing bitcoin as a protective asset?

Colin Baseman

For a significant part of the year, the value of Bitcoin showed a negative correlation with the index of the 500 largest us companies. The situation has changed since October. Since the beginning of the year, the negative correlation between bitcoin and the S&P500 has been 20-30 percent. For gold, the parameter showed positive dynamics.

Attitude to Bitcoin is changing

Today, bitcoin correlates with the "barometer of the US economy " at the level of approximately -10%. This indicates that digital gold will probably not show an appreciation during a period of turbulence in the stock market. According to forecasts, from October, Bitcoin is unlikely to be regarded as a hedging tool during global instability.

Kevin Kaltenbacher, who researches information in Digital Assets Data, noted, "Negative correlation supported the thesis of a means of preserving value. Investors regarded bitcoin as a hedging tool during the global economic turmoil. Recent trends can destroy this stereotype."

Today, the cost of Bitcoin is almost 2 times higher than the level of 3694 dollars, which is how much the world's No. 1 cryptocurrency cost at the beginning of this year. Eddie Alfred, which is one of the founders of the Digital Assets Data, I am convinced that long-term investors need not worry regarding hedging characteristics of bitcoin.

Mr. Alfred emphasized, "The current trend is abnormal." Such periods lasted only 5% of the time.

Peter Schiff said that bitcoin failed the inspection as a protective asset

Peter Schiff, who is an ardent opponent of bitcoin, noted that last Friday, the # 1 cryptographic currency failed testing as a protective asset. Taking into account the progress of the trade confrontation between Washington and Beijing, the Swiss franc, Japanese yen, silver and gold showed strong growth, while the stock market and Bitcoin lost in price.

Tom Lee, who is a Bitcoin optimist, supported the opponent's position. He noted, "This argument is quite substantial. It's hard to argue with him."

The theory that Bitcoin is a protective asset in times of economic and political instability has become popular in recent months, including because of the trade standoff between the United States and China. A number of experts believe that in an effort to hedge risks, investors pay attention to both gold and bitcoin, but evidence of the authenticity of this theory has not been provided.

"Digital gold" is actually popular in countries where there is increased price growth or hyperinflation (for example, Venezuela, Syria), and where the political situation is uncertain (Hong Kong). In the article "How to make money on Bitcoin", you can get acquainted with the opportunities for earning on this cryptocurrency with a variety of circumstances.

Using Bitcoin as a security asset is a common speculation

Brian Kelly, who is the founder and head of investment company BKCM LLC, reported concerns about bitcoin's short-term opportunities. According to the results of his research, it turned out that the number of new addresses stopped increasing.

Mr. Kelly noted, "This factor is fundamental. As a result, new funds are entering the market. We actually need to increase the number of addresses. At the moment, Bitcoin and gold are correlated for the first time since I started talking about it in 2013. Many uses of "digital gold" as a currency hedge. This happens, but it is largely just speculation. It is necessary that real buyers enter the digital currency market."

The President of VKSM is confident in the long-term prospects of bitcoin, while he recommended that transactions with it be conducted carefully in the short term. According to him, institutional investors slowly began to accept a new group of assets, while the value of many altcoins was falling. This has had a positive impact on Bitcoin, it is now confidently leading the market for cryptographic currencies.

The rise in the value of Bitcoin is one of the results of the trade war between Washington and Beijing

The trade standoff between the United States and China is developing. Each state ignores the virtues of free trade, they impose ever-higher import duties and set non-tariff barriers. As a result, export-oriented areas suffer because of the protection of national production. Also, securities and consumers of companies ' products are not in the most advantageous position.

There is an opinion that the trade war launched by Donald Trump will increase the speed of the next financial crisis. Experts at Morgan Stanley believe that in response to the almost inevitable recession, which caused a trade war between 2 States-giants, Central banks softened their monetary policy. As a result, currencies will begin to devalue, which will create additional incentives for exports. This will lead to faster inflation.

In countries with high inflation, Bitcoin is popular. Coins are no longer used as a tool for diversifying investment portfolios, but as a means of preserving value. It is likely that the long-term consequences of the trade standoff will be a global increase in inflation, a recession in the economies of different countries, an increase in currency restrictions and a stagnation of the stock market.

As you can see, not all investors consider bitcoin as a protective asset. At the same time, in countries with political or economic uncertainty, the number one cryptocurrency is often used as a means of preserving value. Anyway, Bitcoin as a means of saving money will be relevant for a long time. So if you don't have the main coin yet, consider buying it.