Tweets mentioning Bitcoin (BTC) as a safe-haven or risk-off asset by users who identify themselves as portfolio/fund/asset/wealth managers have risen substantially between May 2019 to August 2019.
According to data posted by Quant Fiction, a data science analyst firm, these Tweets have grown substantially this past quarter. With growing fears of recession, investors have been looking at Bitcoin and other cryptocurrencies as safe-haven assets, since they aren’t affected by any geopolitical matters or trade tensions.
Tweets mentioning Bitcoin with "safe haven"/"risk off" by users identifying as portfolio/fund/asset/wealth managers
Probably nothing pic.twitter.com/G2WGuJ697V
— Quant Fiction (@quantfiction) August 22, 2019
Bitcoin as a Safe Haven Asset
After the tweets received attention, Quant Fiction clarified that the data does not attempt to suggest whether or not Bitcoin is actually a safe-haven asset or that the authors of the Tweets think so. The data simply points to whether Bitcoin was being included in the conversation or not.
The data looked at tweets from 171 unique twitter users who have portfolio/fund/asset/wealth manager in their bios and have sufficiently high engagement on the social media platform.
Investors move their portfolios into safe-haven assets such as gold or U.S. treasuries whenever there are signs of an economic slowdown. However, Bitcoin’s recent emergence as a safe-haven alternative has been taken with some pessimism since its price has been known for its volatility. Bitcoin has seen an average 12.4 percent annualized 30-day volatility over the last five years, compared to 0.50 percent and 2.5 percent for treasury bonds and gold respectively.
Bitcoin Volatility Similar to the Gold in the 70s
When the U.S. abandoned the gold standard in the 1970s, price volatility arose as a result. There were years like 1975 where gold’s value fell sharply by 25 percent, while just four years later it rose 120 percent. Daily volatility was noticed as well, with gold’s price moving over 3 percent every one out of ten days in 1973. As evidence mounted that gold would continue to serve as a safe-haven asset, return rose sharply and investors started making gold a part of their portfolios.
A similar picture can be seen today in Bitcoin emerging as a store of value. In an interview with Bloomberg, Nate Geraci, president of the ETF Store, said that millennials prefer Bitcoin to gold by a 9-to-1 ratio. Bitcoin has been more appealing to investors since it is very rarely affected by geopolitical turbulence. Thanks to the U.S.-China trade war, a slowdown in developing economies and yuan hitting an 11-year low, Bitcoin is still going strong.
However, critics have said that the recent gains in Bitcoin, as stocks plummeted due to the US-China trade war, reflected more on the cryptocurrency’s potential for quick gains rather than its safe-haven credentials. Marcus Swanepoel, CEO of the London-based cryptocurrency platform Luno, said that in times of market fluctuations, investors are moving small portions of their portfolios into Bitcoin. He added that even though Bitcoin’s history of hacks or heists from exchanges undermines its position similar to gold, it does, in theory, have the potential to act as a hedge.
What, in your opinion, is the role Bitcoin plays in the current economic system? Let us know your thoughts in the comments below.