- Cryptocurrencies such as bitcoin are becoming more and more appealing to investors as safe haven assets as trade tensions and geopolitical forces whip global markets and currencies.
- Because bitcoin is decentralized, it’s not directly subject to market forces such as interest rates or currency debasement.
- Still, one expert explains to us why they don’t recommend investors invest in bitcoin for that reason.
- Read more on Markets Insider.
As escalating trade tensions between the US and China have whipsawed markets and stoked fears of an economic recession, some investors are seeing cryptocurrencies in a new light.
Bitcoin in particular has become more appealing to investors because it’s not directly exposed to the political forces underlying market turbulence. Because it’s decentralized and not dictated by a single government, it’s not subject to the whims of a central bank or political leader.
That insulated nature helped bitcoin reach recent multi-month highs as trade-war turmoil sparked a vicious global equity sell-off. Put simply, traders sought refuge in the cryptocurrency because they weren’t sure where else to hide.
“In a slowdown, since the global economy is so interconnected, there are only a limited number of assets that are isolated,” Evan Kuo, CEO of Ampleforth, a digital asset protocol, told Markets Insider in an interview.
To that end, bitcoin is not subject to the same forces as normal currency. This is why people who feel less trust towards the government see it as an alternative, said Aries Wang, cofounder of Bibox, a digital asset exchange that uses artificial intelligence technology.
But there’s a catch: bitcoin and other cryptocurrencies are quite volatile. Take recent trading for example. Even after bitcoin soared above the $12,000 level on global macro fears, it has since fallen back below the $11,000 threshold.
Still, Kuo says that this volatile can be a plus, so long as it’s not tied to the same forces…