Bitcoin just saw its biggest weekly decline since last year. The world’s largest cryptocurrency dropped by 15 percent to around $10,145, which is its biggest five-day fall since November 2018.
Bitcoin is currently struggling to stay above the $10,000 level in light of strong price resistance due to the easing of the US-China trade war. More recently, cryptocurrency analysts have backed the idea of Bitcoin becoming a safe-haven asset.
Bitcoin Experiencing Strong Resistance in Prices
Matt Maley, an equity strategist at Miller Tabak + Co., said that last year, many had believed cryptocurrencies would become the flight to safety trade. Since then, cryptocurrencies have lost some of that ‘safe asset’ luster. According to an analysis of price-chart patterns, Bitcoin is going through a trend in which each new high is lower than the last one. To break this trend, the digital currency will need to break above its latest high, which was $12,325 on August 6.
The price of Bitcoin in the past week suggests that it is facing a strong resistance near the $10,300 to $10,500 levels. If the struggle continues, Bitcoin may slip below $10,000 in the coming weeks. Bitcoin enjoyed a price boost due to the plunge in Argentine Peso and the ongoing US-China trade war. The current correction could signal a similar situation to the one in 2015 after the parabolic move, where Bitcoin dropped by 40 percent before recovering. Similar to Bitcoin, Ethereum too remained in a bearish zone, where it faced stiff resistance at the $215 price level.
BTC as a Safe-Haven Asset
Many cryptocurrency analysts have said that Bitcoin has become a safe-haven asset similar to gold because it is immune from impacts of geopolitical tensions and government interference due to its decentralized nature. Critics argue that the recent gains made by Bitcoin due to political instability and fears of a looming recession, reflect not so much on its safe-haven credentials, but its potential of quick profits. Adding that since the supply of Bitcoin is capped at 21 million, this adds to its innate value similar to precious metals.
Marcus Swanepoel, CEO of Luno, a London-based cryptocurrency platform, said that due to volatility and uncertainty in the market, investors are transferring small proportions of their portfolios to Bitcoin. This week will likely be a test for Bitcoin with events such as the market meltdown in Argentina, escalation of US-China trade tensions, and the inversion of the Treasury yield curve, which has long been considered to be a future recession indicator.
Do you consider Bitcoin to be a hedge against potential economic crises or just a safe store of value? Let us know your thoughts in the comments below.
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