Bitcoin: The not-so-safe haven

After Bitcoin fell below $10,000 last week for the first time since July, the crypto market recovered and continued to show gains over the past 24 hours. While Bitcoin showed moderate gains, the altcoin market experienced an awakening, with XRP, Ethereum and Litecoin showing noticeable gains. What can we expect this week? 

Today’s Highlights

  • Not-so-safe Haven
  • Crypto Ponzi Scheme
  • The Powell effect

The Not-So-Safe Haven

While cryptos can in no way be considered safe-haven assets, due to their volatile nature and the fact that they belong to a very new market, there have been instances in the past in which a drawdown in the mainstream market prompted investors to buy crypto. That being said, last week highlighted the dominance of the original safe-haven – gold.

 

 

Notice how last week, gold (orange line) overtook Bitcoin (blue) as the go-to hedging tool for investors. This shows that despite Bitcoin’s allure, especially during bearish trends in mainstream markets, it is still too young and volatile to be considered a safe haven.

Crypto Ponzi Scheme?

Many analysts were scratching their heads trying to understand why the crypto market was on such a bearish path last week. On Thursday, one Asian crypto insider, Dovey Wan, reported an alleged $2.9 billion Crypto Ponzi scheme, which took place in China. 

 

 

According to Wan, Plus Token, a now-collapsed exchange that was allegedly scamming its clients, is liquidating the stolen funds, causing an influx of tokens, which could explain last week’s downturn. While it is difficult to believe that a single event could have such an impact, if Wan’s allegations are true, the magnitude of the scam could, in fact, be that significant.

MasterCrypto

Already partnered with Facebook’s Libra project, MasterCard is known to be heavily involved in fintech and constantly looking to stay ahead of the curve. Therefore, it came as little surprise when the New York Post reported on Saturday that the company is building its own cryptocurrency division. According to MasterCard’s recruitment listing, members of the new division will “monitor cryptocurrency ecosystem trends” and “develop new products and solutions.” Does this mean we might have a payment giant creating its own crypto? Or perhaps a crypto credit card? We’ll just have to wait and see.

The Week Ahead

Jerome Powell is becoming quite a global celebrity. In recent months, the Fed Chair has impacted mainstream markets quite a few times and has also been targeted by President Trump. This week, Powell could impact markets again. First, on Wednesday, minutes from the latest FOMC meeting will be released, shedding some light on last month’s rate cut. Then on Thursday and Friday, the annual Jackson Hole Symposium will take place, in which Powell is expected to give a strong indication of the Fed’s next move. Mainstream markets are expected to be volatile in response to these events, and if investors see Powell’s words as an indicator of another negative trend on Wall Street, they might once again seek solace in crypto. 

 

eToro USA LLC; Virtual currencies are highly volatile. Your capital is at risk.

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