This year’s run-up in the bitcoin price has been attributed to numerous factors: the US-China trade war, bold monetary easing by central banks, a weakening Chinese Renminbi, Facebook’s plans to launch its cryptocurrency, as well as market manipulation via Tether’s USDT stablecoins. But a recession is still not one of those catalysts.
The benchmark crypto-asset continues to trend in the negative area as rating agencies send high alerts for the US economy. The BTC/USD instrument this week toppled by as much as 17.94 percent to $9,470 on San Francisco-based Coinbase exchange. At its year-to-date high, the pair was trading at $13,868.44.
Bitcoin looking to close the week on double-digit percentage losses | Image Credits: TradingView.com
The downside move appeared despite a constant projection of bitcoin as a safe-haven – assets which attract investors in times of dwindling price behaviors in the US economy. Supporters believe that bitcoin, which is a non-sovereign, non-correlated asset, would serve as a perfect hedge for investors looking to offload their risks on haven assets. Nevertheless, its performance this week did not reflect any resembling sentiment.
US Treasuries Beating Bitcoin
On the contrary, US Treasuries became a hot property for investors lately. They appear to have shunned risk assets – which might include bitcoin – and are prompting debt instruments to register their best month since 2015.
The Yield on US 10 Year Treasury Note Falls to 2015 Levels | Image Credits: Bloomberg
The yield on the benchmark US 10-year Treasury note has dropped by 46 basis points – 0.46 percent – so far in August. That indicates growth in demand for medium-term debt trades from investors, especially after trade-exposed economies of China and Germany have posted weak economic data which sent yield of US 10-year government bonds below that of shorter-term maturity debt. It’s a sign of a deep recession, based on historical market behaviors.
The trend shows investors are willing to put their money in low-risk havens. Bitcoin, despite its higher returns in 2019, is still looked at as a very volatile asset, with a higher risk-reward ratio than other safe-havens. Adding to the fact that the cryptocurrency has not witnessed a recession in its 10-year of existence, it explains why investors are avoiding the test-and-see approach.
“It’s like maybe BTC is strong enough to swim in the pool right now but not in the ocean,” said Travis Kling, the founder of Ikigai Asset Management. “Maybe BTC can rally with gold when it’s about tariffs but not when its about global growth slowdown.”
Despite bitcoin’s shortcoming, many on Wall Street still sees the cryptocurrency as a perfect safe-haven against the macroeconomic slowdown. Fundstrat Global Advisors’ Tom Lee referred to the socio-political turmoils taking place in Argentina and Hong Kong. He said that bitcoin is already acting like a hedge in those regions, adding:
“You can see it in the markets. Where there’s turmoil, the local Bitcoin prices tend to surge and trade at a premium, because people are trying to find ways to protect their money.”
As reported by NewsBTC, since the U.S. kicked off its latest trade war with its economic rival, China, Bitcoin has gained 105%. While this number means nothing on its own, the average asset class that Grayscale surveyed — stocks, bonds, and foreign currencies included — actually lost 0.5% in the same time frame.
Thus, from an outside-looking-in perspective, it may seem like BTC is totally unaffected by macro events, hence the “digital gold” classification.
But wait, that narrative may be somewhat wrong. Here’s why.
Bitcoin & Dow Jones Reverse in Step
As this outlet has covered, the cryptocurrency market has been absolutely hammered over the past week. Per data from Coin360, Bitcoin, at $9,500 as of the time of writing, has shed 20% in the past week, which is a weekly move that likely reminds many of 2018. And that’s for good reason.
NewsBTC’s Joseph Young recently noted that the U.S. equities market (the Dow Jones and the S&P 500) shed 3% during Wednesday’s session. This is massive, especially in a market worth trillions.
U.S. equities market plunged overnight (Dow Jones down 3% in a single session).
There’s obviously no correlation between bitcoin and the global equities market [yet].
Again, this could have been an eerie freak accident, but analysts have claimed that it goes deeper than that. During 2018, the chief executive of pro-innovation ARK Invest, Cathie Wood, suggested that during global scares, “people sell their most experimental assets, such as bitcoin and other cryptoassets” (quote from Chris Burniske, who paraphrased Wood).
6/ @CathieDWood pointed out to me that in Dec 2018 $BTC was maybe more affected by the global macro scare than people realized.
In such a scare, people sell their most experimental assets, such as #bitcoin and other #cryptoassets (exacerbated by endogenous doubt).
Indeed. Certain analysts, like those from crypto research outfit Delphi Digital, have suggested that while Bitcoin is likely to benefit from a recession or stock market downturn, BTC will first be sold off, resulting in a short to medium-term collapse in the value of cryptocurrencies.
But, once central banks and similar entities look to try and revive the economy, they will implement policies that are beneficial to Bitcoin, like low-interest rates, money printing, and so on and so forth.
But… But… Isn’t BTC a Safe Haven?
This may leave you wondering about Bitcoin’s safe haven status. Over the past few weeks, countless individuals have taken to mainstream media outlets and to social media hubs to talk up the cryptocurrency as a safe haven against geopolitical and macroeconomic unrest.
Considering the aforementioned correlation, however, you may think that these pundits are all wrong. Well yes and no.
Bitcoin can be a hedge against overreaching governments, hyperinflation, and capital controls because of its inherent decentralized, scarce, sovereign, and global nature. But, it may also be susceptible to a collapse triggered by a stock sell-off.
Bitcoin price has been rallying throughout 2019, and most believe that the crypto asset is about to embark on its greatest bull run yet. As global economic tensions and uncertainty rise, so does the price of gold and its digital counterpart Bitcoin. The rise has only further driven Bitcoin’s safe-haven asset narrative, suggesting it’s the best store of value during times of economic collapse.
Before the economy can collapse, the price of both Bitcoin and gold have begun to pull back, showing a continued correlation between the two safe-haven assets. Given gold’s longevity, it’ll always be favored as an economic hedge, but will this latest drop start to cause investors to question Bitcoin’s safe haven narrative or does the continued correlation only further solidify that the narrative has legitimacy?
Continued Correlation Between Gold and Bitcoin Price Movements Only Further Cements Safe Haven Narrative
Throughout much of 2019, Bitcoin price has grown substantially, making it the best performing asset of the year thus far. In recent weeks, as a trade war brewing between the United States and China heats up, gold – the long lauded safe-haven asset investors move capital into during economic downturns – has started to rise ahead of a potential economic collapse. The crypto asset skyrocketing alongside gold has only further driven the recent narrative surrounding Bitcoin as a safe-haven asset itself, due to its hard-coded digital scarcity.
The positive sentiment and interest from institutional investors as a safe-haven asset has helped Bitcoin price climb as high as $13,800 before it was rejected. Over the last few weeks, the crypto asset has maintained much of its bullish momentum and made another attempt at retesting the former high.
Gold, on the other hand, had a bull flag breakout, which has now been rejected back down to levels below where the breakout occurred. With Bitcoin price following gold with such parity, it’s not too surprising to see that BTC value has also fallen further, and has dipped below $11,000 on some exchanges. Price action has bulls trying to push the price of the leading crypto asset back above the important psychological price level.
Gold, which rallied over $100 since the start of the month, saw a rejection that retraced roughly 50% of the gains. Since August 1, Bitcoin price rose from around $10,000 to $12,000 where it topped out, making the current price level a 50% retracement that is right in line with gold’s drop.
The two assets have been tightly correlated for some time, and the more they show correlation the stronger Bitcoin’s safe-haven asset narrative becomes. Bitcoin, along with gold, has recently joined the same conversation as other safe-haven assets such as the Japanese yen and Swiss franc, all sought for their long-term relative stability, sans Bitcoin – known for its notorious volatility.
The increase comes from both institutional investors warming up to Bitcoin as they consider gold, and crypto investors taking an increased interest in gold as the global economy reaches the bring of potential destruction. The increased demand has caused more crypto exchanges, such as eToro and PrimeXBT, to offer gold prominently alongside Bitcoin to crypto traders.
On Monday, OB1, the development team who created the crypto-infused marketplace Openbazaar, launched a new platform called Haven. The application is a mobile version of the Openbazaar marketplace, but also includes social media, end-to-end encrypted messaging, and noncustodial wallet services for a variety of digital assets. The following is a review of the Haven application after experimenting with the mobile crypto marketplace first-hand before the public launch.
The cryptocurrency firmOB1 has launched its second product called Haven, which gives users the ability to access the decentralized Openbazaar network from a smartphone. In addition to the market, the developers have integrated a social media platform that’s similar to Twitter, noncustodial crypto wallets, and encrypted chat. The goal of Haven is to “keep your data and your financial information safe when you shop, chat, and send cryptocurrencies — Using this one-of-a-kind peer-to-peer network means no middlemen or big companies, which means no tracking and no fees,” OB1 explained during the launch.
The application offers pretty much everything the desktop node version of Openbazaar offers, but it does not allow people to trade digital assets. Currently, the platform supports BCH, ZEC, LTC, and BTC and the company has been questioning the public as to whether ethereum should be added. The new mobile application offers four unique characteristics:
News.Bitcoin.com got access to the Haven application on June 15, so we could test the platform and give our readers the ins and outs of the crypto-based mobile marketplace. Haven is available for Android and iOS and takes about 60MB of space on your mobile phone. In order to start an account, the app asks you for a name which is optional, where you are based, the currency you want to be displayed on the platform, and the optional approval of sharing anonymous analytics with OB1.
After that information is complete and a quick user agreement is checked, the Haven application is ready to be used. The first thing you probably want to do is secure your account by backing up the backup phrase and editing your profile page. The process is the same as writing down a mnemonic seed phrase for a traditional wallet, except for Haven the backup is only nine words. After writing down the backup, you can proceed to start editing your profile.
Like Twitter, the Haven platform is a social media app and you can edit your profile adding a profile picture, cover photo, and a description about yourself in the settings. If you happen to be a vendor, you can highlight your store information as well. Haven allows you to post 280 characters of text, pictures, and URL links as well. The posts are uploaded to a public feed that is divided into “most recent” and “trending.” You can like a person’s post, repost it (similar to retweet), airdrop the post’s link, or respond to it with your own message. Since Haven had a head start in beta testing before the public launch, there’s a bunch of users posting on the platform regularly. The profile section itself gives you an overview so you can toggle actions and services like the multi-wallet, a wishlist, notifications for the store and social media, purchase, sales transaction history, and support.
The shopping section is quite large for people who want to spend cryptocurrencies on unique items. You can access this section by tapping the shopping cart at the bottom left of the screen. The marketplace is broken down into categories like electronics, books, games, apparel, sports, vehicles, media, beverages, health and beauty, and a general section that aggregates everything.
If you choose to view a product being sold on Haven, it will show the picture and the seller’s description of the item alongside reviews if there are any. Some Haven sellers have different terms and conditions and return policies. Perusing the platform also shows a great majority of Haven vendors accept all four digital assets, while other dealers accept only one or a few. On top of the general market page, there are featured items shown and highlighted discounts.
The Haven platform also offers an end-to-end encrypted messaging service, which allows you to chat in private with vendors and basically anyone using the application. This means the Haven messenger service encrypts communications so the information can never be seen by third parties including OB1. Two people on Haven could communicate with each other in a private fashion, while the plain text information transmitted is purposely obfuscated.
To access the encrypted chat service on Haven, just tap the caption bubble to message someone or press the “message” tab on the user’s profile page. If issues arise between two people, it is possible to report the user and block them so they cannot contact you using the platform.
Overall the application works well and using the Haven platform interface is fairly intuitive. People can find the application on Google Play and Apple’s App Store. The biggest downside is that Haven has got a long way to go to catch up with the social media incumbents, but Haven’s privacy is a novel change that people have been asking for. However, the social media aspect tied to a built-in crypto marketplace may be enticing to digital currency veterans and newcomers alike. Additionally, privacy proponents will enjoy the platform’s isolated shopping experience and encrypted chat options.
What do you think about the Haven platform designed by the OB1 team? Have you tried this application yet? Let us know what you think about this subject in the comments section below.
Disclaimer: Readers should do their own due diligence before taking any actions related to the mentioned companies, software or any of the affiliates, vendors or services. Bitcoin.com or the author is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article. This editorial review is for informational purposes only.
Image credits: Shutterstock, Haven Privacy, Jamie Redman, Bitcoin.com, and Twitter.
Slashing rates and weakening the USD is bullish for BTC
Because of Trump’s pressure on the Federal Reserve, the central bank could end up cutting interest rates. According to Pompliano, such a lax monetary policy could see capital flow to Bitcoin. In turn that will lift prices toward $100,000 by 2021.
There is a direct correlation between Bitcoin price expansion and global economic turmoil. A slip in the latter causes a sporadic rise in the other, and there is evidence.
With different jurisdictions applying different monetary policies fitting for the stability of their economy and fiat currencies, President Trump is concerned about the US position when it comes to protecting the greenback.
While the USD is a reserve currency influenced mostly by supply-demand forces, he claims otherwise for the Euro and the Chinese Yuan.
In a tweet, he calls for the US to “match the currency manipulation game”:
“China and Europe playing big currency manipulation game and pumping money into their system in order to compete with the USA. We should MATCH, or continue being the dummies who sit back and politely watch as other countries continue to play their games – as they have for many years.”
No doubt, should there be punitive tariffs imposed on the EU while the Federal Reserve slash fund rates, Bitcoin stands to gain as a safe haven. If anything, that would be the perfect primer for a bullish run that could see the asset blast to $100,000 by 2021 as per Pompliano projection:
“In August of last year, I predicted Bitcoin would go down to $3,000 before returning to $10,000. It essentially did that […] now I think it’s going to $100,000, but […] there will be more volatility: there will be parabolic runs like we saw in June and then there will be 20-30 percent drawdowns from that.”
At the time of writing, BTC is down 9.2 percent from last week’s close. However, gains in the past 24 hours are modest to say the least. Building on the double bar bull reversal pattern from the middle Bollinger Band (BB), bulls have a chance.
Although a conservative approach will be to initiate long positions once prices rally above $14,000, aggressive traders can buy the dips. All this is thanks to yesterday’s upswing confirming bulls of July 1st and 2nd.
Unless otherwise there is a counter candlestick wiping out gains of July 3, buyers are in pole position to build on April through to June momentum.
Even if June 27 candlestick is visible, June 26 bull bar leads this trade plan. Any form of price volatility forcing BTC prices above $14,000 and June 26 high must be with high trade volumes exceeding 82k. Similarly, a counter candlestick wiping out gains of July 3 as BTC crumble below $9,500 must ideally be with high participation.
Chart courtesy of Trading View. Image Courtesy of Shutterstock
Bitcoin’s revival is considered to be Facebook’s Libra doing. The social media’s giant sudden foray into the cryptocurrency industry gave bitcoin, as many believe, a perfect reason to grow its valuation.
That is until one considers a simultaneous price rally that took place in the gold market. Bitcoin’s rise above the $13,000 level has only one potential link to the yellow metal’s ascent above $1,400 an ounce: a weaker US dollar sentiment.
Bitcoin has Recovered by More than 275% Since Its Bounce Back from the $3,120 Level | Image Credits: TradingView.com
Gold, Bitcoin against US Dollar
The trouble in the American greenback started with politically-influenced overborrowing. President Donald Trump’s massive tax cut of $1.5 trillion in 2017, followed by his pressure on the Federal Reserve to keep the interest rates steady burdened the US with a $22 trillion debt and $1 trillion in annual deficits. Ahead of the 2020 presidential elections, President Trump is hinting more tax cuts. Atop that, the Fed has declared that it is going to cut rates in July.
The impact is already out in the open. The US dollar on Thursday drifted further away from its highs, although the index recovered from its three-month lows of 95.843 in June. Waning sentiments for a resolution in the ongoing US-Chinatrade war is also hurting the dollar sentiment.
“Everyone from the Reserve Bank of Australia to the Fed is talking about inflation disappointing to the downside,” Mayank Mishra, Singapore-based macro strategist at Standard Chartered, told CNBC. “The Fed arguably has more room to ease than anyone else. That, in theory, should lead to a weaker dollar.”
The dwindling sentiment in the greenback market is lending credibility to both traditional and modern safe-haven assets, including bitcoin and gold.
Holger Zschaepitz, the financial correspondent at WELT, a Berlin-based financial news service, noted that the cryptocurrency had passed the digital divide towards the yellow metal. He said on Thursday:
“Bitcoin gaining traction as store-of-value and digital gold in this crazy politicized central bank world with negative or lower for longer low rates. Digital currency passes digital divide toward Gold. Both assets reached key thresholds in June, $10k & $1,400, now trade in tandem.”
#Bitcoin gaining traction as store-of-value and digital #Gold in this crazy politicized Central Bank world w/negative or lower for longer low rates. Digital currency passes digital divide toward Gold. Both assets reached key thresholds in Jun, $10k & $1,400, now trade in tandem. pic.twitter.com/vrwzJlWsHl
Many analysts think that bitcoin still has to solve its price volatility before it becomes a store of value asset. FT.com reports that investors are hedging into bitcoin as a lottery ticket while hunting for returns.
Meanwhile, prominent gold bull Peter Schiff says that the cryptocurrency is a “fool’s gold,” mainly because it has no intrinsic value like the yellow metal, which still gets used for industrial purposes. While arguing with Barry Silbert, the founder & CEO of Digital Currency Group, Schiff noted that people buy bitcoin expecting they would be able to sell it at a higher rate in the future.