The debate as to whether Bitcoin is a currency or a store of value has swung so heavily in favour of the cryptocurrency being an investable asset that the debate is now more about just how likened to a form of digital gold it is. Gold, as an asset, is quite unique in that it is anti-correlated and a well known safe haven asset, but is Bitcoin in the same boat?
Bitcoin certainly does have its own properties that make it like gold — the coin has been seen to negatively correlate in times of political and financial turmoil, just like gold. It has also performed as one of the best assets of the past decade in terms of returns.
However, Bitcoin as a digital gold still needs to pass a few more tests — namely its reliability in times of financial turmoil, which are becoming more regular. The recent price drop from Bitcoin came at a time when the coronavirus was causing the market to dip. This was probably uncorrelated, but it’s timing disappeared some safe haven claims from Bitcoin.
However, Grayscale Investments, the world’s largest BTC fund, has maintained that Bitcoin has dawned a new investment era based on the attractive properties of gold.
Part of the portfolio
The evolution of Bitcoin’s march towards being a top investable asset can be seen in how attitudes have changed in less than two years. Now, even institutional investors, have said that it is necessary to have cryptocurrency in their portfolio.
“Bitcoin itself has solidified its role as a store of value or as a digital gold,” Michael Sonnenschein, managing director of Grayscale Investments, said.
“So I talk to an institution, they now look at Bitcoin as part of the same flight to safety as they might look at bonds or gold or other things that have served in that capacity for them, and that wasn’t a widely-held narrative probably until about the last 12 or 18 months.”
However, the focus is even starting to expand beyond Bitcoin which is still finding its true designation — according to Sonnenschein, the market is not going away, and will only grow and broaden, making it even more attractive for investors.
“There is ever-growing evidence that this asset class is not going away — investors want access to it, and if the legacy institutions want to remain competitive, they’re going to have to open the door to this asset class for their clients,” he added.