Price moves against gold: is Bitcoin still a safe-haven asset?

Source: Carbon Chain Value (ID: cc-value)

Author: River fish, Alice

In recent weeks, gold has maintained a rising momentum and has continued to rise. Proponents of gold believe that reality has time and again proven the reliability of gold as a safe-haven asset, so if you really want to hedge, you should choose gold instead of Bitcoin.

As new pneumonia began to erupt in Japan, South Korea, and Italy, panic in the global market spread further. On the evening of the 24th Beijing time, European stock markets generally fell sharply, with German stocks and French stocks falling more than 4%, and British stocks falling about 3%. US stocks also opened sharply lower. The S & P fell more than 3%. The Dow Jones index plummeted by nearly 1,000 points at the opening. The Nasdaq also fell more than 4%. At the same time, the spot gold price as a safe-haven asset hit a new high in recent years.

However, what is surprising is that Bitcoin, previously known as a "safe-haven asset", has fallen along with US stocks. In the next few days, the global stock market did not change from the downturn, and Bitcoin not only failed to perform any hedging functions, but started a "storm" plunge: on February 25, Bitcoin lost 3.1%; Bitcoin fell below $ 9,000, a drop of 4.28%; on February 27, Bitcoin fell to $ 8531, a drop of more than 4%.

In just 4 days, Bitcoin dropped from $ 10,000 to $ 8,500. From a price point of view, Bitcoin has not only failed to play any role in countering the risks of global stock market declines, its decline is even more terrible than the stock market.

One cannot help asking: Can Bitcoin still be considered a "hedging asset"?

01Go to the plunge under “ leverage ''

One view is that the fall of Bitcoin has nothing to do with the global stock market crash, but the underlying logic behind it. The reason for the decline of Bitcoin is buried in the reasons for its rise.

Why did Bitcoin rise this round? From the perspective of funds, there does not seem to be a lot of new funds to enter the market; from the number of people, there are not many newcomers entering the market. Then the reason behind this round of Bitcoin's rise is still in the game of stock funds.

With the "half quotation" as a publicity, people in the circle have been looking forward to the "half quotation"; and then through borrowing, many military leveraging leverage to increase the bitcoin's rise. And when the leverage is too high, and no more money can be borrowed to deposit gold, Bitcoin's market can only enter a shock or even fall. The USDT price soared in the market some time ago, but it was difficult to find the USDT in the full market, which seems to prove this judgment. -These USDTs were almost all borrowed for leverage.

According to this view, Bitcoin's "slump" is not because the "halving market" is over, or Bitcoin has plummeted along with global stock markets, but because multi-armed leverage cannot support it. In fact, before Bitcoin and global stock markets plummeted together, Bitcoin had oscillated for nearly ten days.

So will Bitcoin rise again? A player who has been in the Bitcoin circle for nearly 5 years and has nearly 100 Bitcoin holdings gave his opinion:

"Rising will still rise, but many troops have been blood-washed. In the past two days, more than 5 billion have been exploded. Everyone is talking about" halving the market ". As a result, the output has not been halved. First halved. For the bitcoin market, this wave of leverage has been removed, and the subsequent price movements will be healthier. "

The player who did not want to reveal his real name also said, "In fact, I want to tell my friends who have finished the contract that the bull market has plunged, and it is not uncommon for the bull market to pull back 10% -20% before the coming of the bull market. A bankruptcy banker can have extra gains. So you are really bullish, and you ca n’t add that much leverage. Now it ’s over, even if you are still bullish, and you do n’t have chips in your hand, what's the use?

 

02Bitcoin can only be considered an "alternative asset", not a "hedged asset"

Although Opinion One explains why Bitcoin has plummeted recently, it cannot answer whether Bitcoin is a "safe-haven asset".

What is a "hedged asset"? It is a relatively stable type of assets that will not fluctuate too much as the market changes, such as gold and the US dollar. When risky assets such as stocks and bonds plummet, safe-haven assets can serve as an "asset safe haven".

Although the digital currency circle has been shaping bitcoin as "digital gold" for a long time, judging from the price performance of bitcoin this week, "digital gold" is far less than real gold, which is disappointing.

Why did Bitcoin rise sharply during the Sino-US trade war and the assassination of Suleimani, but this time it fell when the global stock market fell? Can it only fight geopolitical risks, but not global financial risks? Should we consider Bitcoin as a "risk asset" or "hedging asset"? These are very important issues.

Regarding these issues, Cai Kailong, a senior researcher at the Institute of Financial Science and Technology of Renmin University of China, has a more profound view. He is writing in a 2019 article "Is Bitcoin a Safe Haven? "The article pointed out that the bitcoin market capacity is too small, the hedging characteristics are unstable, and it also carries huge risks, so it is called" digital gold ".

In his recent article, he also pointed out: "If 3 years ago, there was no stablecoin at that time, Bitcoin would have the function of digital gold. The emergence of stablecoin made Bitcoin no longer a clear hedge. Function, but rather volatile venture capital. "

Therefore, although Bitcoin is named "digital gold" by the currency circle, it is more like a risk asset and cannot be used to combat risk. But does this mean that Bitcoin is worthless? the answer is negative.

Cai Kailong believes that we can take advantage of the fixed and limited circulation of Bitcoin to combat long-term inflation by holding Bitcoin for a long time. In addition, Bitcoin has an unusual price trend, so it can be the best choice in an alternative asset portfolio.

 

03If you want to hedge, you should choose gold or USDT

 

Since people entered the frequent swan event in 2020, gold has hit a new high in seven years, reaching $ 1,670 per ounce this week, and it is up 10% this year. For a non-volatile asset, gold's performance is impressive.

Peter Schiff is an avid believer in gold and a well-known attacker on Bitcoin. He tweeted on February 25: "Bitcoin fans and CNBC anchors should be clear that Bitcoin is digital risk, not digital gold. Over the past five trading days, the Dow Jones Index has fallen 7.3% and the Nasdaq has fallen. 7.9%, Grayscale Bitcoin Trust Fund fell 22%. In contrast, the price of gold GLD rose 1.6%. It is clear that Bitcoin enthusiasts and CNBC anchors should consider Bitcoin as digital risk, not digital gold. "

In recent weeks, gold has maintained a rising momentum and has continued to rise. Proponents of gold believe that reality has time and again proven the reliability of gold as a safe-haven asset, so if people really want to hedge, they should choose gold instead of Bitcoin.

In addition, some people believe that USDT can also serve as a safe-haven asset. Although the price of Bitcoin has plummeted, the price of USDT has remained solid, even higher. Although the exchange rate of USD to RMB is 7.01, according to data from major exchanges, one USDT has sold for RMB 7.14 to 7.16.

As for bitcoin, it may rise or continue to fall in the next global market becoming increasingly uncertain. Due to the small market capacity, and the price is more easily affected by the futures market and manipulated by the giant whale, the price of Bitcoin is almost independent of other markets.

Currently, Bitcoin is holding at around $ 8,800. According to a Bitcoinist article analysis, once Bitcoin cannot hold this support level, it will slide to $ 8,300.