Mille Lees Mille Lees, Wednesday 20th November 2019, 1:46 PM CET
Bitcoin Safe

The Lies of Bitcoin’s Safe Haven

Bitcoin has frequently been expressed as a haven by supporters. This digital currency has refused to succumb to everchanging regulations, with exchanges continuing to grow in profits and popularity. Financial analysts continually are shocked with Bitcoin’s growth, considering that it’s one of the more volatile currencies available globally.

There has been numerous hacking attempts and successful thefts, with hundreds of millions being stolen from Bitcoin’s exchanges. Subsequently, the concept that Bitcoin is a safe haven is unsubstantiated.

One of the more standard pairings with Bitcoin is Gold. Charts indicate that whenever the price of gold rises, the cost of Bitcoin does as well. BTC will rarely influence the gold pairing itself, meaning that its trend lines are dependant on another financial system. This has become the norm with most pairings as Bitcoin’s strength grows weaker over time with continuous theft and hack attempts.

Bitcoin cannot be a safe haven if it’s designed to be uncorrelated from any assets. This combination is incompatible. The open and uncorrelated design of Bitcoin has prompted the consistent theft, with lack of security towards fraud. This is the significant difference between a correlated and uncorrelated currency.

The creators of BTC have infamously not cared about trade wars, terrorism or battlefields worldline. Often the uncorrelated design has made money laundering easier for warlords, drug kingpins and criminal organizations. Official safe-haven currencies are taking into consideration the safety of clients, with their popularity gaining in times of market uncertainty.

Bitcoin’s growth also increases during market uncertainty, but in jurisdictions where political issues are unfolding. Investors with stock brokerages believe that criminal entities worldwide have become stronger since the existence of bitcoin.

Cryptocurrency Enthusiasts

Globally, fans of cryptocurrency have insisted that Bitcoin is an uncorrelated safe haven, which makes little sense to standard investors. The safe-haven concept allows investors to purchase currencies or stocks that are correlated to genuine assets. This enables clientele to avoid plunging risk-assets. Safe havens are supposed to retain their value or grow currency projections when market turbulence is prevalent.

Investors locate these havens to limit loss exposures. Bitcoin always drops in valuation with market turbulence, which enthusiasts of the currency publicly refute.

Google has been flooded with new pages on uncorrelated safe havens since the term became popular. Most of these results relate to Bitcoin or Libra. It appears that risk-assets are trying to rebrand themselves as a safe and reliable form of trading. Those failing for their tricks will see similar theft attacks and hack attempts occur at online exchanges.

Most of Google’s results don’t want clientele of the concerns involved with Bitcoin but instead, glorify its potential. Most are being wrongfully advertised, which can prompt disastrous results going forward in the digital currency markets. There are sites claiming Bitcoin rises by 15% daily but doesn’t mention how bi-yearly the valuation of BTC will be axed in half. The percentage provided by these BTC Enthusiasts is similar to safe havens, leading unknown traders down the wrong path.

The Differences

There are significant differences between an uncorrelated and correlated asset. After determining that Bitcoin isn’t a safe haven, in what context does this currency operate? The answer is that BTC is most similar to hedge funds. It’s another word commonly associated with the coin, with the hedging occurring against central bankers.

Bitcoin exchanges advertise that central banks are depleting the world’s currencies, while they are replenishing them. Most financial analysts debate that Bitcoin isn’t a genuine hedge fund, as the definition explains hedging is meant to adverse price movements to reduce risks for investors. This typically requires offsetting positions with relating currencies. Bitcoin works similarly with price movements but doesn’t maintain any offset positions.

Instances, where clients are worried about stocks crashing and wanting more extended volatility, are best suited for the Bitcoin Cryptocurrency. There is always the chance that all digital markets could crash, but this is highly unlikely.

The best way to explain Bitcoin is that it’s a currency diversifier perfect for clients that require fund managers. It is a high-risk strategy but can sometimes award unsuspected profits. There are many cases when clients hedged their funds with Bitcoin and came out the other end more wealthy.

Mille Lees

Author: Mille Lees

Millie has been with whichbroker.com since the start. She has a passion writing financial news after an internship at Bloomberg London. Millie's background in journalism and politics means she has an eye for a good story. Millie graduated from LSE and has a masters from Durham University England. Mille Lees can be contacted at [email protected], View all posts by Mille Lees

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