As Bitcoin Soars, Is It The New Safe-Haven Play?
Editor's Note: This story was updated to include comments from economist Mark Skousen.
The digital currency bitcoin jumped to a fresh all-time high Friday as global investors looked for safe-haven trades.
Amid the drama in Washington, the S&P 500 fell Wednesday to its worst day since September. So, are investors now turning to the cryptocurrency as a hedge during times of uncertainty over gold?
“If you were asking someone in Asia, then yes, bitcoin is definitely a safe-haven currency that gives them the ability to move funds out of the country. However, in the U.S. or Canada this isn’t the case. It is more of a speculative play than anything else,” said Phil Streible, chief market strategist for Chicago-based RJO Futures.
Japan and Korea are part of the bitcoin surge. Trading volumes in Japanese yen and Korean won account for around 48.6 percent of trading.
But Vince Lanci, founder of Echobay Partners and a columnist for marketslant.com, is weary of the digital money, noting that it is simply a front-end of a technology and “not real.”
“Bitcoin is not a safe haven in the long run,” the veteran trader said, adding that it is electronic and governments will crack down on its use under the pretense of "crime stopping.”
As far as replacing gold, “never,” said Lanci. “But the technology behind bitcoin is blockchain. And blockchain is a growing acceptance, which will be a boost for gold. Not a replacement.”
Mark Skousen founder of the popular Freedom Fest conference which draws Bitcoin devotees, is not stunned by the run up.
“I'm not surprised that Bitcoin has taken off, since by its nature, the supply is extremely limited while the central banks every where continue to inflate -- it's like gold or the Swiss franc in the inflationary 1970s, but more limited,” he told Kitco News.
“As other countries like Japan start allowing it for purchases without tax consequences, it could move even higher,” he added.
Follow bitcoin’s price action on Kitco’s dedicated page