EagleFX

Despite 2018’s harrowing performance, Bitcoin and its ilk are outperforming all other asset classes in the public market. While some have pinned this trend to market cycles, data is showing that at least some of Bitcoin’s rally has been aided by investors using it as a safe haven.

Data from eToro, the Tel Aviv-based investment platform, shows that developments in the trade spat between the U.S. and China are resulting in increased demand for Bitcoin — and gold too. Interesting, right?

Cryptocurrency and Gold

Bitcoin Demand Rises With Gold

Over the past few months, a fresh trade war has been waged between the U.S. and China. President Trump has asserted that the Chinese are taking advantage of America, accusing the nation of stealing intellectual property and taking advantage of U.S. consumers and firms.

According to data from eToro, which offers trading vehicles for both Bitcoin and gold, retail investors are opening more and more positions in the precious metal and cryptocurrency in a seeming response to events in the raging spat. While the chart below doesn’t show that all too well, Simon Peters, an eToro analyst based in the U.K., told the London Economic that there has been an uptick in Bitcoin and gold investors/open interest since the start of the trade war:

“As the US/China trade war has escalated and more announcements of tariffs from both countries are made, we are seeing a greater number of positions being opened in both bitcoin and gold on eToro by retail investors.”


3Commas

According to Peters, it should be no surprise that the demand for the two assets has been rising in sync. He writes that the two assets inherently share many characteristics, citing Bitcoin’s supply cap of 21 million coins, decentralized qualities, non-sovereign nature, and deflationary model. The eToro analyst added:

“Of course, considering bitcoin as a safe-haven asset might not be an easy thing to do. Extreme price volatility, hacks and allegations of price manipulation still weigh on its reputation, however the correlation with gold on eToro’s platform could be a sign that the overall perception of bitcoin is gradually shifting from speculative towards a lower-risk store of value.”

Not Digital Gold?

While the digital gold narrative does have a fair bit of wind in its sails, there remain detractors. One of these detractors is Peter Schiff, a prominent libertarian-leaning investor famous for touting a $5,000 gold prediction. Over recent weeks, the cryptocurrency skeptic — who believes that Bitcoin is a game of “greater fools” and that digital assets have no inherent value — has asserted that Bitcoin is no match for gold. In a recent tweet, Schiff wrote:

“Bitcoin has again failed the safe haven test. On Friday, as escalating trade tensions sent global stock markets plunging, investors sought refuge in monetary safe havens. The Japanese yen, Swiss franc, and especially gold all moved higher. Yet Bitcoin plunged by more than stocks!”

Even Thomas Lee of Fundstrat Global Advisors, one of the most staunch Bitcoin bulls, agreed with Schiff, arguing that he “can’t argue” with the gold bug’s noticing.

While this could just be an untimely coincidence, it is important to note that a similar trend occurred back in December 2018, when stocks shed 20% and Bitcoin collapsed from $6,000 to $3,150.

During the crash seen late last year, the chief executive of pro-innovation ARK Invest, Cathie Wood, suggested that during global scares, “people sell their most experimental assets, such as bitcoin and other cryptoassets” (quote from Chris Burniske, who paraphrased Wood).

Really, this doesn’t imply that Bitcoin has failed as a store of value or a safe haven, it may just show that it has yet to reach its full safe haven potential. But to really convince investors, Bitcoin will need to prove itself in the next recession by vastly outperforming equities.


Buy Crypto    Trade Crypto
eToro Risk Warning: 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

Avatar

Posted by Nick Chong

Since 2013, Nick has shown interest in Bitcoin and cryptocurrencies. He has since become involved in the industry as a full-time content creator, working for NewsBTC, Bitcoinist, LongHash, among other outlets. Aside from covering the news, Nick is a Creative at Taiwanese technology company HTC.


All content on Blockonomi.com is provided solely for informational purposes, and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security, product, service or investment. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate.

One Comment

  1. Avatar

    I can no longer abide listening to Peter Schiff. I used to love the man. I agree with MOST of his analysis – on most things. But his cognitive dissonance where Crypto currencies are concerned has made me unable to now listen to anything he has to say. The bad he is doing for investors out there now outweighs the good he might be doing on the side of gold and silver assets investment. He chirps and chirps about how one or two days Bitcoin went down more than stocks did… CHIRPS AND CHIRPS about it. Yet does he consider that before going down a few percent, Bitcoin has gone UP 300% from the lows. GOLD is not up 300% since December. SILVER is not up 300%. The DOW JONES is not up 300%. So to say that something went down at the same time stocks didn’t for a short period of time, is the most ignorant, biased, ridiculous statement I have heard from an trader in many, many years. I cannot listen to the man any more. Very, very, very sad…

    Reply

Leave a reply

Your email address will not be published. Required fields are marked *