Nicholas Colas, a 30-year Wall Street analyst and co-founder of DataTrek Research, believes that bitcoin now has a nascent role as a safe haven asset. In line with several other observers on the financial sector, Colas cites recent events and the macroeconomic situation as reasons for his assessment.
“First,” he says, “it's kind of coming back to where it started.” Linking the state of the World’s finances now to those of just over a decade ago, when bitcoin first came into being, he illuminated his point while speaking at CNBC by adding that “it started in Jan 2009, during the financial crisis, and it really was born or that kind of turmoil.”
“Secondly,” he expanded, “it's only grown since then, and is obviously very global. So it's not just a US safe haven, but a really global and convenient safe haven.” The final piece of his analysis referred to bitcoin’s continued dominance of the crypto space, both in the public eye - where it is something of a synonym for cryptocurrency as a whole - and in terms of Market Capitalisation.
Over the last year, year and a half, bitcoin has become sort of the standard of all crypto. A year ago Bitcoin’s Market Cap was only half of all the crypto out there. Now it's over two- thirds: 67%. So it's also that all the scammy coins that were out there a couple years ago, have kind of died and Bitcoin’s the one left standing.
This statistic, cited as 'dominance’ in cryptocurrency circles, has seen bitcoin’s share of the market for crypto as a whole oscillate from 80% at the beginning of 2017, to 33% in Jan 2018 before rising up from just over 50% to where it stands today during the course of 2019.
Yesterday we reported on similar sentiments from CNBC analyst Brian Kelly, who asserted that BTC was being used as a “currency hedge”, but through “pure speculation”.
While Kelly supported a buy signal being put out by Goldman Sachs’ analysts, he believed that the current perfect macroeconomic storm of multiple, stumbling global currencies and increased institutional interest is pushing Bitcoin’s price upwards. However, he also voiced his view that could be balanced out on the negative side by a stagnation in the number of new Bitcoin wallets. This, he said, indicated that the lead digital asset was being used as a safe haven option “by macro players and other investors”.
Colas echoed this view, pointing to recent events in Hong Kong as an indicator of how he also sees Bitcoin’s growing role as a safe have as a good predictor of turmoil. Per his words, bitcoin "really perked up around the Hong Kong protests. Bitcoin was one of the few assets we watched that actually predicted that uncertainty ahead of time, nothing else was really moving. Bitcoin was."
“With these assets, we look at percentage change," he continued.
So when you saw a 5-10-15% change in Bitcoin over a week, that was a flashing signal that something was going to happen, we just didn't know what - it ended up being Hong Kong. We’ll look now for a pull-back, to confirm the notion that [because of] trade talks in Hong Kong, tensions are lessening. But a 5- to-10% move to the upside on any given day? You gotta watch the rest of the tape, because something else bad's going to happen.
However, while Colas believes Bitcoin is being used as a safe haven, he is not yet convinced it is safe, per se. When asked about the volatility in price of the asset, and the massive falls in value seen through 2018 and into 2019, he predicted that we will see another similar crypto winter.
It will happen again. I mean, it's important understand with all cryptocurrency - Bitcoin included - that they're always going to be very volatile. It's still a very young technology, a very young safe haven, it's not going to be as stable as gold or bonds.
Bitcoin as 'Digital Gold'
The idea of Bitcoin as a ‘Digital Gold’ has become a long-standing concept in the crypto space in recent times, and was recently identified as one of the three big ‘crypto-narratives’ by one of the co-founders of Blockchain advisory firm AmaZix, Jose Macedo, in a recent Bad Crypto Podcast.
In his predictions about the value of crypto going forward, he linked the ongoing fortunes of Bitcoin to macro problems in the world economy, citing economist Ray Dalio’s belief that the world of today most closely resembles the post-depression economic turmoil of the 1930's.
At that time in history, amid rising prices for the asset, the American Government infamously restricted the private ownership of Gold to prevent hoarding and stimulate the economy.
“That’s really why I think Bitcoin is finding its niche in this economic environment,” Macedo said, “and why crypto is so interesting within the global macro situation.”