While the price of bitcoin dropped by as much as 12 per cent after Russia launched its invasion of Ukraine early on Thursday local time, deVere Group CEO and founder Nigel Green predicts that the cryptocurrency’s status as a risk asset will be temporary.
“Bitcoin is often referred to as ‘digital gold’ because it has been regarded as a safe haven in times of upheaval – one that is uncorrelated with other financial markets,” he explained.
However, Mr Green noted that the price of bitcoin had moved in tandem with the stock market during recent periods of volatility.
“Indeed, the correlation between crypto and stock markets has been pretty solid over the last few months on both inflation news and geopolitical issues,” he said.
“But this might all change again. The ‘digital gold’ fundamentals for bitcoin remain unaltered – namely its limited supply.”
Recent developments could also further bitcoin’s potential as a safe haven, according to Mr Green.
These include limits on cash withdrawals imposed by the central bank of the self-proclaimed Donetsk republic in eastern Ukraine and reports that Russia may potentially confiscate savings in response to sanctions.
“I think we might see it revert to being regarded as a safe haven asset as the situation in Ukraine develops because it is unconfiscatable – which could become extremely important as centralised authorities take drastic steps,” Mr Green predicted.
“In this worrying environment, there’s a real case for a viable decentralised, tamper-proof, unconfiscatable monetary system.”
Moving forward, Mr Green expects that further price drops would be in store for bitcoin but the appeal of “borderless, digital currencies” would remain fixed over the longer term.
“The next few weeks are going to present serious buying opportunities for many investors who seek to take advantage of the lower prices for what is widely regarded as the future of money,” he added.
Jon Bragg
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.
