Bitcoin emerges as a ‘flight to safety’ in 20202020 saw Bitcoin and other cryptocurrencies emerge as a ‘flight to safety’. With investors looking for alternatives to falling fiat currencies, numerous billion-dollar investment firms are flocking to Bitcoin. Today we discuss how Bitcoin emerged as a ‘flight to safety’ in 2020.
Why is Bitcoin a ‘flight to safety’?Earlier this year, head of product strategy at TradeStation crypto, James Putra made headlines with a statement that Bitcoin is a ‘flight to safety’. Putra explained that investors may regard Bitcoin as a good hedge against a falling dollar.
It is a fact that various governments and reserve banks across the globe have adjusted interest rates as a direct result of the financial disruption brought on by the COVID-19 pandemic during 2020.
In a bid to safeguard their investments, many investors now regard Bitcoin as a good hedge against falling fiat currencies.
What is driving the Bitcoin price?As previously stated, higher inflation and interest rates are pushing investors towards Bitcoin. Talks about further inflation hikes could weaken fiat currencies like the US Dollar and at the same time, push bond yields lower. This means that investors are looking for alternatives to bonds and stocks.
A big driver behind the growth in Bitcoin this year was the chaos that erupted in Hong Kong in July. Bitcoin quickly became a ‘flight to safety’ as the White House threatened to cut ties with the Hong Kong Dollar. As protests between Hong Kong democracy demonstrators and the police worsened, Bitcoin buying pressure increased.
It is understandable why Bitcoin and other cryptocurrencies would be the ideal hedge against possible inflation, since it is decentralized and not affected by imminent sanctions.
Furthermore, a new global survey showed that millennials prefer Bitcoin as a safe-haven asset as opposed to precious metals like gold. It is worth noting that the biggest generational transfer of wealth is currently taking place.
Putra was quoted saying that Bitcoin is doing well and it is nice to bet on the fastest horse.
Bitcoin is winning over retail firms2020 has seen many retail firms, investment companies and merchants jump on the Bitcoin wagon. This week, wealth management firm; Skybridge Capital announced they will be launching a Bitcoin fund called the Skybridge Bitcoin Fund L.P. The company manages over $9.2 billion assets under management.
Business intelligence software company, MicroStrategy announced they bought more than $250 million worth of Bitcoin earlier this month. The company shares value increased by 10% following the announcement. MicroStrategy CEO Michael Saylor said they believe Bitcoin to be a dependable store of value and attractive investment asset with long-term potential.
Of course, the biggest adopter of Bitcoin in 2020 was PayPal. In October 2020, PayPal announced it would be launching its own cryptocurrency service. People can buy, hold and sell various cryptocurrencies on the site and accompanying applications.
In conclusion, it is good news for crypto investors that the world is starting to realise that Bitcoin is a ‘flight to safety’. With so many retail firms, investment companies etc investing into Bitcoin, it is a clear sign that this is only the beginning of a trend. Remember to use every dip as a buying opportunity so that you don’t miss out on what is sure to be an epic 2021 for Bitcoin.