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BMO Strategist Counters Bitcoin “Safe Haven” Narrative

Over the past few months, analysts have begun to talk up Bitcoin as “gold 2.0”. Gold is, of course, a historical safe haven and store of wealth used to mitigate the loss of capital over time and through tumultuous periods in history.

While there are a growing number of prominent economists, investors, and even politicians that believe Bitcoin is proving itself to be a proper store of value, there are a few that remain skeptical. BMO Chief Investment Strategist Brian Belski is one of those remaining skeptics.

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Is Bitcoin Not a Safe Haven?

Speaking to CNN Money on Wednesday, the investment strategist explained that Bitcoin isn’t currently a safe haven due to its volatility, which he described as “excessive”.

Indeed, unlike traditional assets, BTC is often subject to 10%+ days, as are altcoins. This volatility is amplified by margin trading, which incentivizes market makers to “run stops”.

Belski goes on to point out that much of Bitcoin’s current investment appeal is “sex appeal”, likely touching on the fact that most traditional fund managers and investors see no inherent value in BTC, just speculative value. He adds:

“I base my investment on longer-term perspective. And I think the longer-term perspective, in terms of Bitcoin being that safe haven, I think it’s way too soon to call that.”

He isn’t the only one currently expressing distaste towards the “gold 2.0” narrative. Speaking to Reuters, Marcus Swanepoel, CEO of London-based cryptocurrency platform Luno, explained that Bitcoin’s recent price action isn’t a byproduct of its safe-haven characteristics, like its 21 million supply cap or non-sovereign protocol. Instead, he claimed that Bitcoin is seen by investors more as an asymmetric bet, which has the ability to provide massive outsized gains. analyst Fawad Razaqzada echoed Swanepoel’s thoughts while also speaking to Reuters. He stated that the recent correlations seen between Bitcoin and gold are nothing more than short-term trends, and are thus not indicative of BTC’s long-term potential as a hedge against risks. Razaqzada adds that the fact that cryptocurrency companies and exchanges are so susceptible to hacks is a clear rebuttal to Bitcoin’s potential status as a safe haven play.

Data Tells a Different Story

The data tells a different story, however. Earlier this week, the Chinese Yuan fell dramatically, falling below the 7.00 peg against the U.S. Dollar. At almost the exact time that the Yuan fell, Bitcoin rallied, gaining hundreds of dollars of value in minutes.

This, coupled with a similar correlation earlier this year, corroborates the long-held theory that well-connected Chinese investors are dumping their Yuan for Bitcoin, which they likely see as a safe haven against a tumultuous local economy. The simultaneous collapse in the Yuan and rally in BTC led Jeremy Allaire of Circle to state:

“You can very clearly see some macro correlation there. I think the broader theme of, you know, Bitcoin specifically, crypto more broadly participating in these global macro forces is becoming more and more clear.”

That’s not all. Per previous reports from Blockonomi, the number of BTC that hasn’t been touched for at least one year has grown to ten million — an all-time high.

Per Matt Odell, a prominent Bitcoin-focused content creator and podcaster, this is a sign that Bitcoin is potentially well on its way in becoming a store of value, as opposed to a digital medium of exchange. Indeed, media of exchange are not meant to be held for an extended period of time, while stores of value should.

Also, Bloomberg data found that the correlation between the market values of gold and Bitcoin have nearly doubled over the past three months to 0.826. Of course, there still isn’t a 1:1 correlation, but it is interesting to see this trend appear as global tensions rise.

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