Beware of Bitcoin as a Safe-Haven Investment

The stock markets are heading for a major shock. Safe-haven investments like gold and silver are going to become popular again. But there’s an all-too-modern obstacle in their way that could attract some of the funds flowing away from Wall Street: cryptocurrencies—Bitcoin in particular. How else can we explain the fact that the Bitcoin price is still near $10,000?

How can it be explained that bitcoins were selling for close to$20,000 a few weeks ago, only to see their value collapse? The fact that neither the rise nor the fall had a clear and logical explanation is one of the reasons that volatility and uncertainty will continue to plague this cryptocurrency.

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This mystery might explain what “crypto” really stands for. Yet, rather than prompt reflection, there are many who continue to believe, without having a clue in what they’re getting involved.

Even the stock market is more predictable. There are several tools that investors can use to “read” where overall performance might be heading. Anything from price-to-earnings ratios to company performance, market, and geopolitics help to establish a semi-predictable pattern.

Gold and silver prices are even more predictable, given their relationship to interest rates, inflation, and politics.

But cryptocurrencies and bitcoins? They respond to none and all of these factors at the same time. They are like a shapeless ghost.

Bitcoin has dropped below $10,000 again. Is it the start of another major plunge, such as what happened in early February? Perhaps. And that’s the problem with the belief that such a volatile instrument could ever function or perform as a currency. It took less than a year for Bitcoin to go from $1,000 to $20,000 and one week for it to drop to $7,000.

The surge in Bitcoin and all cryptocurrency valuations has attracted interest from many people. Many of the buyers have no clue about, nor interest in, technology or finance. Certainly, they fail to understand the “Dark Web” or hacking-universe roots of Bitcoin. Perhaps they prefer to maintain this ignorance, lest they be discouraged by their obscure technical and, at best, illogical nature.