• Bitcoin will lose value in 2022 in line with stock markets
• The correlation between the original cyber currency and gold is increasing
• BofA: Investors are beginning to view Bitcoin as a “safe haven”.
Bitcoin: risky asset or “safe haven”?
Cryptocurrencies are generally known for their high volatility – including the oldest and largest cryptocurrency by market cap, Bitcoin. Bitcoin has increased significantly in value since its launch. In 2017, it reached an intermittent high of nearly $20,000 before depreciating significantly again. It hit new highs in 2021, climbing to over $60,000 in the spring and hitting a new all-time high of nearly $70,000 in November. However, it is now a long way off: Bitcoin currently costs around US$18,400 (as of November 8, 2022).
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However, the crypto veteran is not only known as a risky asset. There have also been times when Bitcoin has been traded as “digital gold” and a so-called “safe haven” due to its limited volume of circulation – which investors like to flee to in uncertain times. While Bitcoin has historically been more correlated with stock markets and the digital coin has behaved more like a risk asset than a hedge against inflation, according to Bank of America, Bitcoin may soon once again become a safe haven for investors. .
BofA: Investors may view bitcoin as a relatively safe haven
As Bloomberg reports, the 40-day correlation of Bitcoin and the Philadelphia Gold and Silver Index (XAU) was recently around 0.50 – down from around zero in mid-August. Correlations with the US S&P 500 index and NASDAQ 100 technology index are higher at 0.69 and 0.72 respectively, but have stabilized and are below the peak values of a few months ago.
Bank of America strategists Alkesh Shah and Andrew Moss see this as a sign that Bitcoin could become a safe haven: “A slowing positive correlation with SPX/QQQ and a rapidly rising correlation with XAU indicate that investors may consider Bitcoin as a relatively safe haven. macroeconomic uncertainty persists and a market bottom is not yet visible,” the strategists were quoted by Bloomberg as saying.
Crypto bull Mike Novogratz bullish
Bank of America strategists are not alone in their assessment. As Investing.com reports, recent comments from Crypto Bull and Galaxy Digital CEO Mike Novogratz match what BofA strategists are saying. Speaking at the C4K Investor Conference on October 20, he said Bitcoin will be the “canary in the coal mine” alongside gold and will rally ahead of other tokens. And according to Bloomberg, Lauren Goodwin of New York Life Investments also explained that Bitcoin and gold can both be seen as a hedge against the central bank.
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