Amid escalating geopolitical tensions between Russia and Ukraine, many riskier assets have recently suffered bouts of weakness.
Bitcoin is part of this group. The biggest digital currency is down 5% in the past week, as of the end of February 24, putting pressure on exchange-traded funds like the Valkyrie Bitcoin Strategy ETF (BTF) In the process. Bitcoin’s collapse in the face of Russia’s invasion of Ukraine is a blow in case the cryptocurrency potentially turns into a safe-haven asset and its status as digital gold.
At least, that’s the feeling of many opponents. However, some experts say bitcoin won’t be a risky asset for long, indicating that it could rebound soon and potentially provide support for funds like BTF along the way.
“However, over the past few days, its price has taken a hit, in tandem with the stock market also falling during more volatile times. As such, Bitcoin is currently considered a risky asset, alongside stocks. », says deVere Group CEO Nigel Green. “Indeed, the correlation between crypto and stock markets has been quite strong over the past few months, both on inflation news and geopolitical issues. But all of that could still change. The fundamentals of “the digital gold” for Bitcoin remain unchanged, namely its limited supply.
For its part, BTF, which debuted last October, does not invest directly in bitcoin. Instead, he invests in bitcoin futures with holdings in US Treasury bills to offset some of the risk associated with full bitcoin exposure.
Green says the situation in Ukraine could actually accelerate bitcoin’s return to being considered a safe-haven asset.
“Furthermore, I think we could see it come back to being seen as a safe-haven asset as the situation in Ukraine develops because it’s non-confissable – which could become extremely important as centralized authorities take drastic measures.” , notes Green.
There could be something in this theory. Ukraine’s central bank limits the amount of cash customers can withdraw from ATMs, and some people around the world are sending bitcoins to support the Ukrainian military. Additionally, sanctions against Russia could make the citizens of that country vulnerable to the loss of traditional financial assets, further strengthening the case for bitcoin.
“Crypto is an exciting new asset class, and as such the way it is treated by investors will naturally continue to evolve,” Green concludes. “Yet one thing will remain fixed: the allure of borderless digital currencies in our increasingly tech-driven world.”
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Opinions and predictions expressed herein are solely those of Tom Lydon and may not materialize. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.