Mar 23, 2020 02:30 UTC
Mar 23, 2020 at 02:30 UTC
Bitcoin, By Design, Is Meant To Be A Store of Value Asset
The last couple of weeks, the markets have once again brought up questions about whether BTC deserves the title of a safe-haven asset or not.
Obi Nwosu, the Coinfloor CEO, highlighted the challenges in the latest episode of the Blockchain Insider podcast faced by digital currencies like Bitcoin, and gold, in maintaining their safe-haven status. Today, there are, with regard to the 12 March price crash, polarizing views regarding why it occurred and what it really means for BTC in the long run.
The liquidity crisis, as indicated by Nwosu, was one of the reasons behind the BTC sell-off that brought the Bitcoin price down by close to 50%.
As per the CoinFloor CEO, for large traditional investors, BTC provided required liquidity, while traditional assets were doing quite bad.
“If the price goes down and they get liquidated, they stand to lose a lot of money, so it makes sense for them to add a little bit of money to their positions to make sure they don’t get liquidated.”
The CEO of CoinFloor additionally highlighted that Bitcoin and Gold are meant to be store of value assets, by design. He argued –
“As of December last year, we were in Bitcoin only because we believed that Bitcoin is a store of value. That’s its actual purpose. It’s designed for these scenarios and Bitcoin and things like gold will show over the coming year or so that they are actual stores of value.”
It is important to see how it reacts to geopolitical as well as socio-economic events. As a matter of fact, a recent study by the University of Pretoria had highlighted that heightened levels of geopolitical risk might actually benefit the price of Bitcoin.
It stated –
“Heightened levels of GPR are likely to affect positively Bitcoin prices as investors consider Bitcoin as a hedge against global uncertainties.”
According to the study, Bitcoin, out of 5 leading digital currencies, registered major jumps or price discontinuities, all in sync with the increasing level of GPR.
In spite of such studies, the safe-haven story for BTC remains on shaky ground. This was recently noted by investor and CEO of Galaxy Digital may have reduced investor confidence in the digital currency as a hedge. He stated –
“The narrative of new adoption in Bitcoin is as a store of value or in the other coins as part of the future of building a decentralized internet. You know, it sets it back 12, 18 months. You can kind of tell cause we’re going to have to get through this and then you’ve got to rebuild confidence.”