Upward movement of Bitcoin prices are showing strong correlation with market uncertainties
Growing uncertainty in global asset classes has led speculators to invest in cryptocurrencies and betting on safe havens.
The onset of China's Coronavirus, trade wars, and geopolitical tensions, have fuelled the demand for bitcoins. The price of one bitcoin has now crossed the 10,000-mark against one US dollar. But, will the trend continue?
"There's no doubt that bitcoin passing the $10K mark has justifiably grabbed the headlines. However, I wouldn't put it down to global uncertainty in the markets. It's all about momentum now. Bitcoin looks to be rising slowly. Some investors will claim that this reflects the maturity of the cryptocurrency. It certainly is less volatile, and slow and steady wins the race. One thing is for sure, BTC is here to stay," said Michael O'Loughlin, global finance and technology thought leader, and managing director at Token.
Bitcoin, Ethereum, Xrp, Binance Coin are some of the popular and sought after cryptocurrencies in world market. The latest research by Kryptoszene.de, indicates that more than 52 per cent of financial experts believe that bitcoin prices will continue to rise over the next five years and four per cent expect bitcoin to trade over $100,000 in 2024.
Saeed Al Darmaki, chairman of eGovern, said: "There have been two major events where bitcoin has shown negative correlation to traditional assets. When there was tension between Iran and the US, we saw bitcoin prices go up, whilst other assets went down in value. After that tension eased off, the next major event was the outbreak of the Coronavirus. This time bitcoin did the same and jumped in value, whilst other assets went down in value."
The number of cases of Coronavirus is still rising and so is the price of bitcoin. "I expect to see more global uncertainty in the short to medium-term and this negative correlation to persist. In a nutshell, bitcoin is behaving in a similar fashion to gold which has also reacted positively with the above incidents, hence why it has been coined digital gold. Bitcoin will continue to be a safe haven for investors in times of global uncertainty for the foreseeable future."
Around 37 per cent of financial experts believe that bitcoin prices will range between $10,000 and $24,999 in 2024. On the other hand, there are warning signs: eight per cent believe that the bubble will burst by 2024, and that at that point, BTC will not be worth a single dollar. Market analysts have already been critical of Bitcoin price developments in the past. Although positive predictions seem to outweigh the negative ones, private investors are still slightly skeptical.
Deepak Machado, risk management and certified Bitcoin Professional, said: "Bitcoin is up nearly 48 per cent year to date 2020 and 180 per cent in 52 week. There is hardly any other asset class that has given these kind of returns. Bitcoin's movements are not particularly correlated with other assets like gold, stocks or US dollar. Given the ongoing trade wars, bitcoin is increasingly viewed by many as a way to protect their wealth and a hedge towards global uncertainties."
Before, there were times when investors were a bit skeptical about trading using bitcoin, but as technology has progressed they have become more aware. They are now enjoying the perks of auto trading platforms and readily available tools, that are powered by artificial intelligence and backed by an algorithm in which you can create bitcoin portfolio, which run the coins through numerous rules and filters to ensure that only the highest quality digital asset with a solid track record are chosen and maintained to get you the desired profit, pointed out Taha Sajid, chief technical consultant at Limar Global Tech.
"Global uncertainty in markets has always brought innovation, that's what we have witnessed in global financial crisis back in 2007, with an invent of bitcoin and fintech. For me, traditional investments/IPOs will soon be old school, most investors are eyeing bitcoin for their trading, and the reasons are no brainer, it is the ease of the registration process with less paper work, the quick and high profit margins on an investment, 24/7 availability and then its ongoing market adoption rate through increased no of exchanges, payment processors and Crypto ATMs," Sajid said.
Bitcoin has soared by almost half this year, to more than $10,000, for the first time since October. Early this week, it hit its highest in five months.
The cryptocurrency's 11-year history is replete with fast ascents and equally rapid plunges. In late 2017, it rose three and a half times in just 35 days to reach almost $20,000. It then slumped 70 per cent in seven weeks.
Upward movement of Bitcoin prices are showing strong correlation with market uncertainties. This is third occasion when the prices are showing upward trend and increased trading interest at the time of global worries.
Arshad Khan, co-founder of Arabian Bourse, said: "The note on which 2020 started, latest being the coronavirus threat, markets were vary that this can negatively affect the bitcoin mining and hence prices may slump. On the contrary, prices have seen 30 per cent increase in the last few months. This strongly demonstrates the safe haven status that this asset class is achieving. Prices shot past $10,000 resistance level and are now comfortably sitting above this level."