March 4, 2021

Is bitcoin a safe haven?


The European Central Bank kept the price of money at 0% at its meeting on July 25 and pointed to a new wave of economic stimuli in September. This opened the door to a currency war. Immediately, US President Donald Trump reopened hostilities with Europe, accusing the ECB of acting like China, weakening the euro to "artificially" compete with US exports. Europeans "have had their way with this for years, along with China and others," Trump said in his usual tweeting. By the way, he was pressing the US Federal Reserve to take action on interest rates. The commercial war started by Trump himself turned against him with all the blocks trying to protect his exports, the Germans in the case of Europe, greatly affected by his strong presence in the US and China.

After the Fed took the decision last week to lower interest rates for the first time in ten years, China has made this week the decision to depreciate almost 2% its currency, the yuan, placing it in its exchange rate with the lowest dollar in eleven years, lower than the psychological change of 7 yuan per dollar. Trump's new palette, calling the Chinese regime "currency manipulator", only sharpens the offensive on currencies as a new front or as a response to the commercial war.

At the same time, with the main currencies depreciating, bitcoin has benefited from a more than remarkable rebound. Since the president of the ECB, Mario Draghi, opened the door to new stimuli and the euro bank kept the rates, the main cryptocurrency has appreciated by 21% from the 8,860 euros to which was changed on July 25 around 10,300 euros to which it quotes today. Why?

Although the price of cryptocurrencies is a mystery, as they do not respond to a change linked to the strictly economic pulse, their main reference is the situation in which the “guaranteed” currencies are. If these are depreciated together, cryptocurrencies gain value because they are not subject to any commercial reality. Therefore, oblivious to the current ups and downs, bitcoin has taken a breath. Just last Monday, bitcoin appreciated 7%, with US markets falling sharply. Although financial investors had the refuge of gold or the Japanese yen at hand, the cryptocurrencies noted a remarkable breakthrough that has not ceased as the exchange conflict intensified, immune to geopolitical tensions.

It is not the first time that bitcoin becomes a refuge value. Without going any further, last May bitcoin revalued 41% while Wall Street fell 3.8% in response to Trump's threats to impose new tariffs on China. So far, the increases are measured as large funds try to diversify their refuge values ​​as much as possible and move small portions of their portfolios to cryptocurrencies, as cryptocurrency managers recognize. But if the depreciation of the “guaranteed” currencies is sharpened, cryptocurrencies, especially bitcoin, can find a reef to pick up at 2018 levels, when a change of 18,800 euros per bitcoin was reached.

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