[2016-10-06] Will investors flee to bitcoin in times of distress?

[elyas772]

With financial markets currently watching the turmoil in the European banking system, and with Deutsche Bank’s problems to the fore, does bitcoin provide the safety investors require in times of distress?

According to a recent CoinDesk feature, any ratcheting up of the current problems in the financial may prove a boost for the digital currency as investors reject traditional fiat currencies.

“The capital markets have awakened to bitcoin as a disaster hedge,” writes analyst Chris Burniske, blockchain products lead for investment manager ARK Invest.

“The digital currency doesn’t correlate with other asset classes, an aspect that may make it more attractive in times of uncertainty,” wrote Burniske, adding,

https://news.markets/bitcoin/will-investors-flee-to-bitcoin-27856/

[Westfiled]

"“The capital markets have awakened to bitcoin as a disaster hedge,” writes analyst Chris Burniske, blockchain products lead for investment manager ARK Invest.

“The digital currency doesn’t correlate with other asset classes, an aspect that may make it more attractive in times of uncertainty,” wrote Burniske, adding,

“Depending on how people feel about Deutsche Bank’s future prospects, they may choose to hedge themselves from the more traditional markets by using bitcoin.”

But are investors truly ready to use crypto-currencies, including Bitcoin, as a hedge against global systemic contagion when the sector has itself had a few high-profile problems.

In June this year, ethereum start-up company DAO announced that it had been hacked and around $55 million worth of ethers were stolen, sending the price spinning lower. A sharp sell-off was also seen in big-brother rival bitcoin with charts showing losses of around $100 per coin.

Bitcoin price since September 2014

bitcoin

And in August this year, the price of bitcoin fell sharply after Hong Kong-based exchange Bitfinex said that it had discovered that nearly 120,000 bitcoins, worth around $65 million, had been stolen.

Another risk for bitcoin holders, compared to traditional banking is the fact there is no depositor’s insurance to absorb the loss, even though many exchanges act like virtual banks.

A recent Reuters article on the cyber-security threat to crypto-currency exchanges highlighted that not only does that approach cast the cybersecurity risk in stark relief, “but it also exposes the fact that bitcoin investors have little choice but to do business with undercapitalized exchanges that may not have the capital buffer to absorb these losses the way a traditional and regulated bank or exchange would.”"

[yayayo]

Whatever "the capital markets" really are... ...investors are certainly more aware today of Bitcoin than three years ago. And it's also true that Bitcoin is a safe haven investment, that may be chosen as a method for capital flight. But we should not overestimate the immediate effects of market distress on Bitcoin. There are more established safe haven assets - such as precious metals - that are the natural option for capital flight since centuries.

So I do agree that market turmoil will be positive for Bitcoin, but immediacy and magnitude should not be overestimated, because investing in Bitcoin requires a learning process most investors have not yet begun with.

ya.ya.yo!

[gentlemand]

I'm stuck in the UK and my coins have done very nicely out of the pound's fall. But for someone coming cold to it, I really don't think it's a realistic option. Proper traders are going to realise how tiny and warped the Bitcoin market is. You can't run to safety when the market itself is fundamentally a joke.

[richardsNY]

Maybe that a few will go for Bitcoin, but I am quite sure that people will prefer gold over anything. Especially the more wealthy individuals. As gentlemand also mentioned, the current market of Bitcoin is indeed a joke as it is. There is no liquidity for very wealthy people to make Bitcoin an interesting option. That's a fact.

[TraderTimm]

Nobody mentioned the absolute lack of correlation that Bitcoin has to any equity index or major market. That's a good thing.

As for gold, I don't see many advantages to "stacking" where sales are recorded, gold is dense and not easily transported over borders (searches for wealth transfer specifically target gold and cash mules), and you have to worry about its quality, even from a reputable source. I don't need to "assay" my Bitcoin -- its either confirmed in my wallet or it doesn't exist.

But everyone has to pay lipservice to gold, because thousands of years, blah blah blah blah blah. Just because the same shiny trinket is used over a long period of time doesn't mean that societal values won't change.

Also, whenever there's a disaster, such as the typhoon in southeast asia -- you dont' see survivors dusting off their "stacks" to get food and water. They just storm the warehouses and fucking take it. I don't buy the whole prepper attitude of "Gotta have gold to trade with when everything falls apart" -- because actual GOODS will be more valuable than your precious stacks. But let them learn that lesson on their own, I guess. (If such a scenario even ever happens... which I doubt.)

Screw gold.

Bitcoin uber alles.

[aso118]

Real big money (institutional investors) have a mandate they have to adhere too.
I don't see Bitcoin figuring in those mandates. Investors will have to make do with what options are available.

[anonbit992]

As the investor and trader community all over world are getting aware of bitcoin and other altcoins, we can expect them to add bitcoin and perhaps some altcoins into their portfolio holdings in the coming years. There are projects such as ICONOMI which provides index investing options to investors who are new to digital currencies. So, an investor can easily buy bitcoin and invest some of it in ICONOMI coins which invests into other promising and established coins.

[European Central Bank]

There are projects such as ICONOMI which provides index investing options to investors who are new to digital currencies. So, an investor can easily buy bitcoin and invest some of it in ICONOMI coins which invests into other promising and established coins.

so wall street is gonna pour into this iconomi thing? I hope its holders ain't holding their breath. they might be in for a long wait.

I think it'll be 10-20 years before real investors start to take bitcoin seriously if it's still alive by then. there should be a perspective indicator here reminding them that it's really not very big.

[TraderTimm]

There are projects such as ICONOMI which provides index investing options to investors who are new to digital currencies. So, an investor can easily buy bitcoin and invest some of it in ICONOMI coins which invests into other promising and established coins.

so wall street is gonna pour into this iconomi thing? I hope its holders ain't holding their breath. they might be in for a long wait.

I think it'll be 10-20 years before real investors start to take bitcoin seriously if it's still alive by then. there should be a perspective indicator here reminding them that it's really not very big.

You do realize that the CME - the largest futures exchange in the world - is working on making an index for Bitcoin for eventual trading contracts?

I find your 10 - 20 years laughable in that respect. But then again - you are named after a dinosaur banking cartel.

[European Central Bank]

I find your 10 - 20 years laughable in that respect.

i'm not complaining if it comes sooner but when I say 10-20 years I mean it being something as ubiquitous as gold or bonds are at present. sure, there's attention now but it's still at the fringes and an awful lot of pros still don't know much about it and many that do won't be willing or able to touch it.

[panju1]

I find your 10 - 20 years laughable in that respect.

i'm not complaining if it comes sooner but when I say 10-20 years I mean it being something as ubiquitous as gold or bonds are at present. sure, there's attention now but it's still at the fringes and an awful lot of pros still don't know much about it and many that do won't be willing or able to touch it.

The establishment is going to do everything in their power to spike Bitcoin's rise.
So 10-20 years is an optimistic estimate for Bitcoin to be ubiquitous. 

[Daisy14]

Big investors might consider crypto worthwhile by 2020 because I heard that big banks are preparing to have their own coins for exclusive in-house transactions.