Cryptocurrency

Is Bitcoin Becoming a Safe Haven Currency?

If you want to protect yourself from the negative influence of an unfair economy or unstable world on your financial well-being, then investment in cryptocurrencies may be the answer.

You may have heard that Bitcoin has been achieving new price records from the start of the year.  This has caught the attention of investors, both small and large, throughout the world.  This new technology, what they call a “digital currency” is growing in popularity and legitimacy – achieving a staying power that many predicted was impossible.

Forbes recently featured an article talking about how Bitcoin has joined the ranks of gold as a safe haven trade for investors.

Just like your house provides you with a shelter from all the dangers (to a certain extent), investing in a safe haven provides the same comfort.  A safe haven is a precautionary trade which investors trade under heightened uncertainty. The ultimate safe haven trade for investors has been the yellow shining metal, however, a new popular derivative which is behaving like a safe haven is cryptocurrency. Bitcoin stands tall in that basket because as of today the collective market cap of all the cryptocurrencies has reached a $161 billion for the first time.

The price of gold and Bitcoin are showing solid gains and this is nothing more than a risk off trade.  In the beginning of August, gold price bounced by $31 (from the lows of $1258.80 an ounce) due to the heightened tensions between the US and North Korea. Similarly, Bitcoin price was trading somewhere near $1985 per coin in the middle of July and as the hostilities between the two nations heightened, the price skyrocketed to $3000. Thus, it is evidently clear that investors have used Bitcoin as another tool to hedge their risk. Simply put, they are considering Bitcoin as a safe haven currency.

I have been looking into Bitcoin as well as other cryptocurrencies for a small part of my portfolio.  I believe that the general uptrend will continue, but the volatility is something that you need to come to grips with.  Long term thinking is a must.

The full article can be found at www.forbes.com

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