With the new crisis, bitcoin confirms its status as a safe haven for crypto


As institutional investors flee cryptos, retail investors often fall back on the iconic bitcoin, number 1 in terms of market capitalization and with the longest survival history.

Bitcoin, digital gold? Since May 2022 and the collapse of the Terra Luna blockchain, the cryptocurrency market has been in turmoil. In this context, cryptocurrency investors seek refuge in the one they deem safest, often bitcoin. Common point between gold and gold, by definition THE safe haven: rarity. 21 million bitcoins, no more, no less, will be created without any institution being able to change it. This “immutable programmed policy” contributes to its success according to Josselin Tonnellier, chief product officer of Stackinsat, which offers bitcoin-based financial products.

Of the 19.09 million bitcoins created, only 2.4 million are available on exchanges

However, since the beginning of May 2022, bitcoin has lost 47% of its value. So we’re far from a safe investment or a gold rush… But this sudden drop could be attributed to “large portfolios” according to Josselin Cooper. Mutual funds, speculating on its price and hoping to take advantage of leverage, have massively unloaded their bitcoins, saying they, like other assets, are too risky. Then there are the crypto protocols damaged by the crisis that resell their bitcoins in exchange for cash.

Individual investors, for their part, took advantage of the price drop to buy it. The number of users with more than 0.1 bitcoin, i.e. about $2230 on July 18, 2022, has never been higher: 3,706 million on July 12, 2022 against 3,177 on July 17, 2021 according to data collected by Glassnode, an increase of 17% while at the same time the price of bitcoin fell by almost 40%.

Acceleration in the number of bitcoin addresses by at least 0.1 bitcoin in recent weeks. © Glassnode

The purchase of bitcoins is a long-term investment, typical of safe havens: according to Stackinsat co-founder, 23% of bitcoins are kept for five years. Of the 19.096 million bitcoins created, only 2.4 million are available on exchanges, or 12% of the total volume. Usually bitcoin accumulates, treasures, deposits.

Contest

There have never been so many cryptocurrencies: 13,400 in July 2022 against 4,500 in February 2021, according to Statista. Despite this wide choice, bitcoin remains the preferred option for crypto investors: its capitalization is the largest in the crypto market at $425,810 million, as of July 18, 2022, and the capitalization share in that of the crypto market totals 44%, again according to Statista.

Bitcoin critics argue that it cannot be a safe haven as it has lost 71.3% of its value since November 2021, when it peaked (source: CoinGecko). But this data must be placed in the context of the fluctuating cryptocurrency market. “Most cryptos have lost 90% of their value from their highs,” says Josselin Tonnellier. Finally, when confidence in a crypto protocol is shaken, the latter buys bitcoins to reassure investors.

Of course, the comparison with gold stops at the border of the digital world: the capitalization of gold is estimated between $10,000 and $11,000 billion. Bitcoin? about 2,870 times less. “It’s not heavy enough for the amount of money in the financial markets, it can’t absorb billions a day,” notes Josselin Tonnellier. Dominant, comforting, secure crypto currency, bitcoin is a safe haven…but only in the world of cryptos.

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