With the new crisis, bitcoin confirms its safe haven status for cryptocurrencies


As institutional investors flee cryptocurrencies, small investors tend to fall back on the iconic bitcoin, # 1 in terms of market capitalization and with the longest surviving history.

Bitcoin, digital gold? Since May 2022 and the collapse of the Terra Luna blockchain, the cryptocurrency market has been in turmoil. In this context, cryptocurrency investors take refuge in what they believe to be the safest, often bitcoin. There is a common point between it and gold, THE safe haven by definition: rarity. 21 million bitcoins will be created, no more, no less, without any institution being able to change anything. This “immutable programmed policy” contributes to its success according to Josselin Tonnellier, chief product officer of Stackinsat, which offers bitcoin-based financial products.

Of the 19.09 million bitcoins created, only 2.4 million are available on exchanges

However, Bitcoin has lost 47% of its value since the beginning of May 2022. We are therefore far from a safe investment or a gold rush … But this sudden drop could be attributed to “large portfolios” according to Josselin Cooper. Investment funds, which speculate on its price and hope to benefit from the effects of leverage, have massively dumped their bitcoins, considering them, like other assets, too risky. Then there are the crypto protocols damaged by the crisis that resell their bitcoins for cash.

Individual investors, for their part, took advantage of the drop in its price to buy it. The number of users with more than 0.1 bitcoins, or about $ 2,230 as of July 18, 2022, has never been higher: 3,706 million as of July 12, 2022 versus 3,177 as of July 17, 2021 according to data collected by Glassnode, an increase of 17% while at the same time the price of bitcoin fell by almost 40%.

Acceleration in the number of bitcoin addresses holding at least 0.1 bitcoins in the past few weeks. © Glassnode

Buying bitcoins is a long-term investment characteristic of safe havens: according to the co-founder of Stackinsat, 23% of bitcoins have been stored for five years. Of the 19,096 million bitcoins created, only 2.4 million are available on exchanges, or 12% of the total volume. Most of the time bitcoin accumulates, treasures, accumulates.

competition

There have never been so many cryptocurrencies around: 13,400 in July 2022 versus 4,500 in February 2021, according to Statista. Despite this wide choice, bitcoin remains the preferred option for cryptocurrency investors: its capitalization is the largest in the cryptocurrency market with $ 425.810 million, as of July 18, 2022 and its capitalization share in that of the cryptocurrency market in the as a whole it is 44%, again according to Statista.

Critics of bitcoin retort that it cannot be a safe haven as it has lost 71.3% of its value since November 2021, when it peaked (source: CoinGecko). But this data needs to be placed in the context of the fluctuating cryptocurrency market. “Most cryptocurrencies have lost 90% of their value from their high point,” says Josselin Tonnellier. Finally, when trust in a cryptographic protocol is shaken, it buys bitcoins to reassure investors.

Obviously, the comparison with gold stops at the border of the digital world: the capitalization of gold is estimated between 10,000 and 11,000 billion dollars. Bitcoin? about 2,870 times less. “It’s not heavy enough for the amount of money in the financial markets, it can’t absorb billions a day,” notes Josselin Tonnellier. Dominant, reassuring, safe cryptocurrency, bitcoin is a safe haven … but only in the world of cryptocurrencies.

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