Like Gold, Bitcoin Is A Safe Haven During Economic Turbulence, Says Former UBS Managing Director
- Investors are flocking to safe assets like govt. bonds, gold, and Bitcoin
- But Bitcoin as a safe haven asset performs better than any others
Paul Richards, the President of Medley Global Advisors and former Managing Director at UBS recently spoke with Bloomberg about the asset classes that are in the driving seat at the moment.
“Fixed Income has now become a safe haven, almost like how Gold or even Bitcoin have become safe havens,” said Richards.
Fixed income is a type of investment security that pays fixed interest payments until its maturity date. Government and corporate bonds are the most common types of fixed-income products.
Investors Are Flocking To Safe Assets Like Govt. Bonds, Gold, And Bitcoin
With investors nervous about the trade war between the world’s two largest economies, they are frantically turning to US government bonds and pushing yields lower in the process.
The 10-year US Treasury yield dipped to 1.75% Monday, its lowest level since October 2016.
Yields are falling as demand for bonds increases and price rises, a sign of growing investor anxiety about where the global economy is heading.
The 10-year yields for French and German bonds have been below zero for a few weeks now. The 20-year German bonds went negative on Monday with Dutch bonds joining the club. British 10-year bond fell to its lowest level ever at 0.5%.
It is possible the US 10-year could get back to all-time lows of below 1.4% from 2016 summer as well, especially if the Fed continues to cut rates over the next few months, believes experts.
Despite the fact that it seems crazy to buy bonds that pay little, if any, interest, investors are flocking to these assets which is a classic case of investors looking for a safe haven.
But Bitcoin As A Safe Haven Asset Performs Better Than Any Others
However, Bitcoin triumphs these bonds and even gold when it comes to returns as in the past seven days Bitcoin price has surged more than 23%. And experts are pointing out how it is acting as a safe haven.
“A lot of this might have to do with some capital flight out of China,” said Tom Maxon, head of U.S. operations at electronic-payment products company CoolBitX Ltd.
“It definitely appears to be acting somewhat like a safe haven,” said Brad Bechtel, head of foreign exchange at Jefferies LLC.
When markets are calm, Bitcoin falls by the wayside but when we see “turbulence” and the market sell-off, he says, Bitcoin and other safe haven assets rally.
“With the turmoil in markets and the streets, suddenly digital gold doesn’t seem like such a bad idea,” Jehan Chu, managing partner at Kenetic Capital, told Bloomberg from Hong Kong, where massive public protests continue.
“Bitcoin is increasingly seen not only as a bet on the future, but as a shelter for the present.”
Bitcoin bull and Fundstrat’s Tom Lee says Bitcoin is “positively correlated to gold” and has proved itself to be a “hedge against global risks.” This is what he says will “help it propel to new highs.”