Over the past year or more the global economy has had turbulent times within traditional markets. Some would attribute this to many countries around the world such as Greece, and Venezuela faltering with debt, but some would say the popping of the Chinese stock market bubble on June 12, 2015, was truly the catalyst for our current volatile economy. During these unsettling times investors all around the globe search for better hedges and safe havens such as gold and now Bitcoin to protect their wealth.
Investors Worldwide Are Hearing About Bitcoin’s Safe Haven Attributes
It’s become apparent this year over the past six months that Bitcoin is on a tear and has been increasing in value steadily against many sovereign fiat currencies. So with all the volatility happening within the economy investors worldwide who are searching for an instrument that retains its value have probably heard about the cryptocurrency. Typically certain currencies have been called a safe haven over the years most notably the Yen, and the U.S. dollar. However, those times have changed over the past couple of years as both fiat currencies have been floundering and more so during the down markets these past few months.
Then investors also look to the top dogs of the performing safe haven assets such as gold and U.S. Treasury bonds but those markets have been quite slow up until recently with precious metals showing some gains just this month alone. But before the attention the Brexit referendum there was the Grexit everyone talked about, and Greece had faltered on attempts to pay the IMF. Gold had done nothing at this time to provide any safe haven and Bitcoin seemed to be the coming asset of the new century among investors. Typically gold is considered a safe haven when markets look like a nightmare and bonds backed by full faith credit also do well during these times. Yet in 2016 this is not the case. The cryptocurrency Bitcoin has taken the definition of assets, hedges and safe havens for a ride.
— Barry Silbert (@barrysilbert) June 24, 2016
“If one was to invest $1,000 into the Bitcoin network in 2011 that person would be a millionaire today.”
Gold, U.S. Treasury Bonds, Yen, and the Dollar Have Taken a Back Seat to Bitcoin’s Settlement Speed
There are many reports of this new fascination of Bitcoin becoming a cement hedge of investment holding firm. According to Ark Invest and Coinbase in their recent paper “Bitcoin: Ringing the Bell for a New Asset Class” the study estimates that roughly “seven million people around the world hold a material amount of bitcoin.” Despite the small size of investors Ark and Coinbase say, “we believe its thin market and fringe status is overstated. A surprisingly robust ecosystem has grown in the seven years since its inception, giving retail investors the tools and opportunity to drive over one billion dollars in daily liquidity.” The end of this statement is crucial as this is what is driving Bitcoin’s ability to become a thoroughbred of assets the ability to move large amounts of wealth fast.
— ARK Invest (@ARKInvest) June 23, 2016
Gold can be a fantastic safe haven and had been for centuries. However, it also costs a lot more time and effort to hoard gold. Surely one can store vast amounts of bullion at their home but could be robbed by doing so and managing to move these quantities is not so simple. Gold being a physical object is heavy and carries weight and the more you have, the harder it becomes to move it. Bitcoin and cryptocurrency solutions can move large quantities of wealth in a secure and speedy settlement period. Investors can also use a blockchain implementation or use the digital currency to move around gold as well.
“It’s not just for techies and nerds as institutional investors have created trusts, EDNs, and ETFs as it continues to show its hedging strengths during shaky economic times.”
With Bitcoin settlement it doesn’t take days to complete nor does it need a third party intermediary. This means an investor can move any amount of fiat currency into the network swiftly or purchase a million dollars worth of gold bonds in minutes. Not only is this settlement faster even with today’s block congestion the movement is also secured by the laws of encryption. This puts an investor 100% in control of funds while still being able to move this wealth rapidly.
Settlement time is still slow with correspondent banking practices, the Swift network, automated clearing house transfers, Fedwire and more. There is no platform that can thoroughly process these actions to date without third parties involved, deferred settlement systems, and government intrusion. Except there is a protocol that can facilitate those who would rather practice in real-time gross settlement processes with individual sovereignty. The system is called Bitcoin.
The reason for Bitcoin’s investment prowess is because it serves as the ultimate vehicle for wealth liquidity without the costs, frustrations, and trust factor of using middlemen. There is a network of machines churning out transactions which are completely anonymous to the equation, with the main intent to secure the blockchain by incentive-based rewards. Bitcoin is an uncorrelated asset protected by machines, investors, and the ability to provide returns during heavy economic manipulation.
“Bitcoin and cryptocurrency solutions can move large quantities of wealth in a secure and speedy settlement period.”
Bitcoin Is a Safe Haven and That Has Consistently Outperformed Gold Since 2011
Bitcoin is an asset class like no other and investors are hearing this daily as its noise cannot be kept silent. There are those who clamor about its volatility when they compare it to the USD, Yuan, or other fiat currencies. Despite this Bitcoin has performed better than all of them six out of its seven years with massive returns except for 2014. The cryptocurrency is an uncorrelated asset that is not tied down by board meeting decisions, pension fund payouts and the Federal Reserve’s interest rate manipulation. Bitcoin’s YoY value has performed phenomenally with successful gains of more than 1,000% during most of its life. Gold, U.S. Treasury Bonds, the Yen, and the dollar have not performed in this way ever. As the post-Brexit aftermath wreaked havoc on most traditional markets, gold increased a mere 5% with Bitcoin seeing an uptrend of 17% over the past 12 hours.
This is bitcoin's coming out party as a global safe haven investment. Amazing
— Barry Silbert (@barrysilbert) June 24, 2016
Bitcoin is a safe haven and has shown its strengths in this way. It’s not just for techies and nerds as institutional investors have created trusts, EDNs, and ETFs as it continues to show its hedging strengths during shaky economic times. Just before the whole Occupy Wall Street debacle, gold prices were on a tear in 2011 rising to $1,900 USD that year. If someone was to invest $1,000 into gold that year they would be sitting with a devalued shiny metal worth significantly less than the person’s original thousand dollar investment. But if one was to invest $1,000 into the Bitcoin network in 2011 that person would be a millionaire today.
The cryptocurrency is a quality hedge and safe haven at the same time and using failing fiat currency to measure its value daily may not show this incentive outright. But investors are slowly learning it’s attractive returns are something no other asset can provide, and this is becoming apparent to mainstream media investment types writing in Barron’s, Market Watch, Investopedia, the Street, Wall Street Journal, Forbes, Business Insider, and much more.
If investors are looking for a safe haven asset in 2016s troublesome economic times, they may want to invest some research into the high-yielding returns and retaining value Bitcoin has provided time and time again.
— ARK Invest (@ARKInvest) June 22, 2016
Sources: CNBC, Ark Invest, Barron’s, Market Watch, Twitter, Wikipedia, Gold Spot Prices, Bitcoin Price Index
Images: Pixabay, and Crypto-graphics.com