- Bitcoin topped $12,000 for the second time in three days on Wednesday as risk assets fell on fears of a global recession.
- The cryptocurrency is acting more and more like a safe-haven asset where investors seek refuge when other assets fall.
- Even though bitcoin is itself a volatile asset, some experts argue it’s shielded from some of the geopolitical news that moves other markets.
- Watch Bitcoin trade live on Markets Insider.
Bitcoin rose more than 2% Wednesday, breaking the $12,000 level for the second time in three days. The gains come as traders seek refuge as global risk assets sell off on worries that global recession is on the horizon.
US stocks sank on recession fears Wednesday just two days after turning in their worst day of 2019. Bonds rallied, with the yield on 30-year Treasurys sinking near record lows. Other safe-haven assets also boomed as gold topped $1,500, a six-year high.
“The recent Bitcoin rally strengthens the argument for Bitcoin as a store of value,” Ken Xuan, a data scientist at Fundstrat, said in a note Monday.
Bitcoin also topped $12,000 briefly on Monday after markets sank when China let the yuan fall below a key psychological threshold versus the dollar. The nation also said it would stop buying US agricultural products to retaliate against the threat of further US tariffs.
Bitcoin is mimicking a safe-haven asset because its correlation with other assets more linked to geopolitical news has diminished, Thomas Lee of Fundstrat wrote in a note.
He noted that the cryptocurrency is becoming less tied to the US dollar, while its adherence to equity performance has also decreased in 2019. Meanwhile, bitcoin has gotten more closely correlated with gold over the last 100 days, according to Fundstrat.
Because bitcoin is decentralized and operated by a distributed network as opposed to a central bank, it is less likely that its price could be fixed, Sky Guo, CEO of Cypherium, told Markets Insider in an interview.
“It’s harder to manipulate the circulating supply, and that’s why some people think it is a safe haven,” Guo said.
To be sure, Bitcoin is still facing tailwinds, especially over the next four to six weeks, Lee wrote in an earlier note. Risk of regulatory action spurred an 18% fall in July after US lawmakers criticized Facebook’s digital coin, Libra, which raised concerns about the overall legitimacy of crypto.
But still, the “crypto winter” is likely over, Lee says. Bitcoin is up roughly 215% this year, though it’s far below its highest price near $20,000 set in 2017.