'Bitcoin is a Safe Haven' Narrative Got into Trouble - Analysts
Recent developments in global traditional markets and bitcoin's (BTC) moves complicate the narrative that the price of the most popular cryptocurrency benefits from safe haven capital flows, crypto market analysis firm Coin Metrics said.
“Recent firmness in macroeconomic indicators confirm that fears of a global recession are overblown and optimism for a U.S.-China trade deal is rising," they said in their weekly report.
The firm said that there is a shift underway - market participants believe that we are past the point of peak monetary policy easing, based on the following factors:
- the increase in long-term sovereign bond yields across most developed world economies
- a shift in forward guidance from the U.S. Federal Reserve (Fed)
- a sell-off in gold.
Because of greater geopolitical instability, softness in a number of key macroeconomic indicators in most developed world economies, as well as a sudden pivot to more monetary policy easing, particularly from the Fed and from the European Central Bank, gold and other haven assets have seen large capital inflows for the majority of 2019. This has led to gold rallying above USD 1,500, then peaking in late August, the report explains, where a comparison to BTC as a store of value could’ve been drawn. “Indeed,” the report says, “short-term measures of correlation between bitcoin and gold returns earlier this year reached one of the highest levels in history (almost +0.50).” (The values of the correlation coefficient range between -1.0 and 1.0. The higher the number, the stronger correlation is).
BTC is often discussed in the media when there’s an increased need for safe-haven assets, but is ignored at other times. That said, gold has recently seen one of the largest single-day sell-offs in years, said the report, yet the 30-day correlation between gold returns and BTC stands at -0.22.
“Recent price action and short-term measures of correlation between bitcoin and gold returns complicate the simple narrative that bitcoin benefits from safe haven capital flows,” the report said, concluding that these factors have indicated that the reaction of BTC to macroeconomic and geopolitical developments is complex and inconsistent.
In their previous reports the firm said that it’s likely that in the times of the heightened geopolitical and macroeconomic risks and the desire for the stability of haven assets, the intrinsic qualities of Bitcoin and gold "can experience short-lived periods of high correlation."
However, some analyst believe that while bitcoin may be considered a risky asset for most investors, for some people, living in troubled regions, it is already a safe haven.
Also, other analysts, such as Murad Mahmudov, the head of investments at crypto hedge fund Adaptive Capital, stress that it will take some time until Bitcoin becomes a real safe haven.
"I don't know when, but eventually we will have to pay the price for central banks printing money on overdrive, while debt has escalated to unimaginable levels. A massive global recession is on the cards, and when it arrives we should see a whole new appreciation for deflationary and decentralized cryptocurrency," Bitcoin analyst Simon Dingle recently told Cryptonews.com.