A battle that bitcoin backers often fight is the digital currency’s status as a credible safe-haven investment. Detractors, including gold bugs, assert bitcoin is just too volatile to be a legitimate safe-haven, but some investors see things differently.
“For thousands of years, gold has been the ultimate financial safe haven. It’s always been the go-to asset in times of political, social and economic uncertainty as it is expected to retain its value or even grow in value when other assets fall, therefore enabling investors to reduce their exposure to losses,” said deVere Group founder and CEO Nigel Green in a recent note.
Green believes it’s just a matter of time before bitcoin, the largest digital currency by market value, becomes a safe-haven.
Some Surprising Factors
One of the most often cited knocks against bitcoin is that digital assets are volatile. While the largest cryptocurrency has had its bouts with turbulence, some investors may be surprised to learn bitcoin actually has some favorable volatility statistics.
Bitcoin proponents argue that it is the ultimate alternative asset, combining high potential returns with low correlations and intraday liquidity. Has that held up during the recent market volatility? Some data points confirm the cryptocurrency has actually been less volatile than much of the S&P 500 this year.
“Moving forward, older investors are likely to continue with gold, but millennials and Generation Z, who are so-called ‘digital natives’, can be expected to go for Bitcoin and other digital currencies instead,” said Green. “I believe that the precious metal will lose its crown as the most sought-after reserve asset to Bitcoin within a generation – particularly because the biggest-ever generational transfer of wealth – likely to be more than $60tn – from baby boomers to millennials is already underway.”
There are catalysts for increased bitcoin adoption. Millennials, the rise of China, demand for privacy, rising interest for alternative investments, and headwinds among traditional assets are significant factors that will continue to fuel demand for cryptocurrencies.
“Bitcoin’s key characteristics, such as its fixed supply and how transactions are immutable, distributed, non-sovereign, and decentralized are highly attractive for investors in an uncertain but increasingly digitalized, tech-driven world,” according to Green.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.