about 4 years ago • 2 mins
With coronavirus fears giving stocks their worst week in a decade, investors have instead flocked to their trusty “safe havens” in times of strife. But cryptocurrency, it transpires, isn’t one of them… 😔
Global stocks and commodities have suffered in recent days, erasing all their gains for the year to date – and then some.
Investors have instead turned to the relative security of dollars, gold, and government bonds: gold’s price is now up 9% this year, while US bond yields (which fall when demand and prices rise) have plunged to record lows. Look out for our imminent Pack on investing in those…
But while recession fears and the likelihood of interest rate cuts (where possible) grow, cryptocurrencies – hailed as recently as last month as a potential shelter from stock market storms – have failed to step up. Instead, the price of so-called “digital gold” bitcoin has, along with those of other major cryptos, fallen over 12% so far this week 😱
While cryptocurrencies’ “corrections” look eye-catching, they’re not as significant as stocks’. Crypto prices are, after all, no strangers to volatility: the 3% daily drops shaking stock investors this week had already hit bitcoin six times since Christmas. And unlike stock markets, bitcoin is still up 20% in 2020.
What’s more, crypto prices likely weren’t helped this week by signs that inbound international regulations designed to limit bitcoin’s prized anonymity may cause cross-border blockages – as well as news on Friday that two major crypto exchanges were under siege from hackers 👩💻
Nevertheless, prominent claims that bitcoin could act as a gold-style safe haven when stock markets were spooked now appear to have been disproved – with one billionaire investor this week declaring bitcoin to be “uncorrelated”. But when traditional investments are going haywire, that’s not necessarily a bad thing…
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