Bitcoin and cryptocurrencies not safe havens? Too early to say

US, WASHINGTON (ORDO NEWS) — Like the traditional financial market, the prices of cryptocurrencies collapsed in the wake of the coronavirus crisis, shattering in passing the concept of safe haven. At least, this is the short-term analysis.

A parallel is often drawn between gold and certain cryptocurrencies, the foremost of which is Bitcoin. Financial analysts observed a correlation between the price of gold and that of Bitcoin a few months earlier.

Conclusion: these assets could claim the status of safe haven. The global crisis due to the coronavirus epidemic, however, questions this conviction. The press specializing in cryptos also makes this observation.

At the start of the crisis, even gold fell

“Bitcoins are not a safe haven. But neither is gold at the moment,” says Decrypt, for example. In the traditional economic press, questioning is also topical here: Hangover from Bitcoin and lack of review of safe haven.

For Francois-Xavier Thoorens, CEO of the French blockchain startup Ark Ecosystem, it is advisable to beware of short-term and clear-cut conclusions. A safe haven? “Not at the time of the crisis. Even the gold goes down.

Moreover, in 2008, in the midst of the subprime crisis, this was already the case for gold. We could then just as easily say that gold has failed its safe haven examination, ”comments the expert.

For Vincent Ganne , Cryptonaut analyst and commercial manager at TradingView France,” BTC is seen as a long-term investment”. This position is shared by the manager of Ark, who believes that the quality or otherwise of a safe haven will be assessed “when the panic stops.”

Before speaking of “failure” or “missed exam”, he considers a longer-term analysis essential. This fall would firstly be the consequence of a major liquidity crisis, with sales of cryptocurrencies aiming to recover dollars and euros.

Exchanges that have become pools of liquidity

Moreover, notes Francois-Xavier Thoorens, the exchange platforms “have become a kind of large reservoir of liquidity, without any comparison of course with the equity markets”.

The fall could therefore be explained by sales made by institutional investors in search of liquidity – as in the commodities and gold markets.

This market practice was thus observed for example at iExec and ChainLink with a liquidation “of the entire USDT order book, truly to recover dollars. The injection of liquidity into the economy, through the Fed and the ECB, could alleviate this need for liquidity.

The key is stabilization (downward, however, for the time being) of the price of cryptocurrencies. This remains a hypothesis. But it is only once the panic has passed, and if there is sufficient liquidity, that it will then be possible to disqualify or not the crypto-assets as safe havens.

For Ark’s boss, it is nevertheless advisable to learn a first lesson from this crisis:

We were very pleased in 2018 with the arrival of the first institutional funds in cryptocurrency. The consequence is a divestment to meet their need for cash. The fall in prices is therefore also a counterpart to the institutionalization of investment in cryptocurrency,” he said.

Disappearances of crypto players, not cryptocurrency

He also wishes to recall that these technologies remain recent and that the players in this market are still young. Today, they are facing their first real crisis with the coronavirus. The question of mining and profitability also arises.

“The halving is double-edged. If the price is not high enough, the miners will no longer be profitable. It is not impossible that minors go bankrupt and have to stop their activity,” said the expert.

For its part, Ark Ecosystem does not say it is worried about its own sustainability in this context, thanks to sufficient funding for the coming years.

We anticipated that the crypto world would face a lot of storms due to the ecosystem itself or due to exogenous causes,” said his CEO.

The latter also believes that the crisis could help to clean up the landscape, with the disappearance of projects and “experts of all kinds”, for the benefit of “those who work hard to get out of the ordinary”.

Francois-Xavier Thoorens therefore declares himself “optimistic for the future of crypto and Ark. We will be among the survivors, that’s for sure.”

 

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The article is written and prepared by our foreign editors from different countries around the world – material edited and published by Ordo News staff in our US newsroom press.

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