The price of bitcoin is trying to recover after the collapse of the cryptocurrency market last week, marked by the collapse of the UST, the stable currency of the Terra blockchain. Falling below $ 30,000 – and up to $ 25,400 on May 12 – can bitcoin still be considered a value reserve? “Today, given the fluctuation of the course, it can not be described as such,” says Laurent Pignot, financial analyst at Zonebourse. “You can’t put your money there and tell yourself it will retain its value over time,” he says.
Because the price of the most important cryptocurrency in terms of capitalization is changing too fast. It regularly experiences strong turbulence, as illustrated last fall, and appears to be a very risky asset. Since reaching all-time highs in November 2021, bitcoin has fallen by almost 60%. “No expert can predict the value of bitcoin in five years,” said Laurent Pignot. A difficult exercise no matter what the asset, but it seems even more dangerous for the cryptocurrency. In the past, the price of bitcoin has plummeted by more than 80% in one year.
Investing in this asset remains a bet on the future, given the value given to cryptocurrency and the technology on which it is based. That is, a blockchain that works with a working test mechanism to validate transactions, which consumes a lot of energy but is also ultra-secure.
Too correlated with major technological actions
Another obstacle to the theory of bitcoin as a reserve of value is the evolution of its price compared to other assets. The price of bitcoin is increasingly correlated with the prices of major technology stocks, which are especially listed on the US Nasdaq market. In 2021, many traditional finance players have entered the field of cryptocurrencies. Traders invest in bitcoins as they do in technology company stocks, adopting comparable arbitrage.
But when the stock market crashes, the drop in cryptocurrency assets seems even more pronounced. “The correlation is very important in the price peaks, but in the lows of the bearish phases, it is no longer observed. Historically, then, there is a decorrelation of falls, ”says Laurent Pignot. Currently, the cryptocurrency market is particularly marked compared to other asset classes. Bitcoin has plummeted 39% since early 2022, when the Nasdaq recorded a loss of around 25%.
It is not a solution to fluctuating stocks
“Unlike precious metals, and in particular gold, bitcoin does not, therefore, protect itself from fluctuations in stocks,” said the financial analyst. “Since the beginning of the year, the yellow metal has continued to grow by 8.7%, while the CAC 40 has fallen by more than 11%,” said the Comptoir national de l’Or, which specializes in investing in precious metal. in a note dated May 17th.
And while gold – considered the quintessential safe haven – can sometimes lose value, it is never in the same proportions as bitcoin. That doesn’t stop the cryptocurrency from “remaining the best-performing asset of the last 10 years,” recalls Laurent Pignot. But bitcoin is still a very young asset, when gold can tell a long history and therefore reassure the preservation of its value over time.
Clearly, bitcoin is still a highly speculative asset today, bought by many people in the hopes of seeing its price double, triple or even more in the future.
But a rare and liquid asset
Nevertheless, cryptocurrency has arguments to argue. And despite its high correlation with the Nasdaq, it has the characteristics to become a reserve of value. “Bitcoin is very liquid, easily interchangeable and increasingly accessible,” says Laurent Pignot.
In addition, the cryptocurrency benefits like gold from a certain scarcity, with the total number of bitcoins issued limited to 21 million. A predefined amount since its launch in 2009, which can only favor its appreciation over time. “Central banks, on the other hand, can print as many banknotes as they want,” the analyst recalls.
An advantage to the first?
Also, if bitcoin were to be adopted more broadly as a real currency, its price might not be related to technology stocks. By contrast, drastic regulations by powerful states could scare investors and drive down prices. Especially if countries went so far as to make cryptocurrency illegal.
But today, the trend is more towards the spread of bitcoin in the economic fabric. “Regulators don’t want to ban it, just frame it, so it’s not the wild west,” says Alexandre Baradez, head of market analysis at IG Brokerage. “They understand the value of the technology behind it.”
According to US billionaire Sam Bankman-Fried, head of the FTX cryptocurrency exchange, bitcoin has a future as an “asset, commodity and store of value”, similar to gold, reports the Financial Times. On the other hand, he does not believe in his role as a means of payment.
Last argument in favor of bitcoin: it remains the benchmark in the cryptocurrency market. “It is now sought after by those who want to diversify their heritage,” says Alexandre Baradez. It would also enjoy a kind of “first bonus,” he adds, like Tesla to electric cars. In fact, Bitcoin is the first cryptocurrency ever created and the best known today. A position that could reinforce its value over time.