Is Bitcoin the next safe haven since the global economy is taking a huge hit due to the coronavirus pandemic

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2nd April 2020 – (Hong Kong) Cryptocurrency remains a mystery to many, which is why it might come as a shock that financial experts are now wondering whether Bitcoin can be considered the next safe haven. The global economy is taking a huge hit due to the coronavirus pandemic, with a recession becoming likelier with each passing day. Continue reading below to understand where cryptocurrency fits in all of this.

Defining what a safe haven is

Simply put, safe havens are a type of investment that’s expected to either retain or even increase in value during turbulent times – such as the one we’re in right now. Southeast Asia provides a perfect case in point for understanding why safe havens are so crucial, as Asia Times notes that the constant growth within the region continues regardless of fluctuations in the global market. Since economies are closely tied to political and environmental changes, investors are always looking for safe haven assets to help protect against a sudden turn of events. Other safe havens include gold, government bonds, and defensive stocks like utilities and healthcare.

The current state of cryptocurrency

It remains to be seen whether cryptocurrency is truly a safe haven. The answer changes depending on who you ask, and it sometimes even changes depending on the day. Just last month, cryptocurrencies tanked as investors were panic-selling their stocks as the coronavirus epidemic worsened. This fall was then met with an upsurge in prices just last week, with Bitcoin surging to over US$6,500 from its US$3,500 value on 12th  March.

Traders are naturally being wary of this sudden price increase and are waiting to see if this momentum increases. That said, some traders are optimistic about this turn of events. Some market analysts expect that the upward momentum is likely to continue, and things are looking good especially as it crossed the US$6,000 mark.

How to move forward

Cryptocurrency’s volatility is why many potential investors are still on the fence, and rightly so. This is why Plus500’s trading platform relies on notifications and price alerts to notify traders of any increases and stops to help investors curb their losses. The decentralised nature of crypto makes it easy for even the most novice investor to get involved, provided they have the right tools. Since volatility is a given, potential investors just have to find a way to navigate this landscape.

In terms of larger financial institutions, widespread crypto adoption may be closer than we think. South Korea passed laws to regulate cryptocurrency exchanges last March 6; even as early as last year Jeju was being touted as potentially becoming the world’s first crypto tourist destination. This law was unanimously passed amidst the country’s growing coronavirus crisis, with lawmakers wanting to tap into this growing industry and the Korean start-ups that surround it. While the specifics of this framework have yet to be decided, it does speak to the fact that cryptocurrency is moving beyond its shadowy past and is slowly being seen as a legitimate financial asset.

Our post on Bitcoin’s sudden price drop on 19th March  of last year proves just how dynamic cryptocurrency can be. The economic downturn brought about by Covid-19 means that investors everywhere are scrambling to minimise their losses and make money where they can. Some are hedging their bets that cryptocurrency can become the next safe haven asset, but whether that becomes the case has yet to be seen.