QUICK TAKE: Crypto as Safe Haven?12.13.2018
Can crypto be a safe haven despite the recent Bitcoin sell off?
Yes, according to Ian McLeod of Thomas Crown Art. In a conversation with Traders Magazine he said cryptocurrencies like Bitcoin and Ethereum will increasingly be seen as investors’ ‘safe havens’ in 2019. This bold prognostication comes amid growing concerns that the global economy is likely to experience a significant slowdown before the end of 2019. He pointed to leading economic indicators tracked by the OECD have weakened since the start of the year and suggest slower expansion over the next six to nine months.
Similarly, the wider global expansion that began roughly two years ago has plateaued and become less balanced, according to the International Monetary Fund.
“There’s a growing list of investment tailwinds to consider for 2019,” McLeod said. “These include significant trade tensions, rising interest rates, political uncertainties, including Brexit, and complacent financial markets. The U.S., the world’s largest economy, has, of course, considerable influence on Asian and European economies. As such, should ther U.S. stock market plunge – as it did recently scrapping all of its 2018 gains during a major sell-off – global markets are vulnerable too.”
Against this backdrop, he added investors can expect cryptocurrencies will increasingly be seen as investors’ ‘safe havens’ in 2019 and beyond.
“When the downside of the economy hits, digital assets cryptocurrencies like Bitcoin and Ethereum are likely to be viewed by investors as a robust means of storing wealth, in the same way they do with gold,” McLeod predicted. “There are several keys reasons why the likes of Bitcoin and Ethereum will be safe havens. These include scarcity, because there’s a limited supply; permanence, they don’t face any decay or deterioration that erode their value; and future demand certainty as mass adoption of cryptocurrencies and blockchain, the technology that underpins them, takes hold globally.”
Of this latter point, he added that as mainstream adoption is going to dramatically gain momentum in 2019 as the world, especially business, realize ever-more uses for and value of crypto and blockchain.
“We are some way off from cryptocurrencies replacing the Swiss Franc, the Japanese Yen or gold as the preferred safe haven assets,” he said. “However, as the world moves from fiat money to digital, and as adoption of crypto picks up, there can be no doubt that cryptocurrencies will be firmly in the pantheon of safe haven assets within in the next decade.”
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