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The price of Bitcoin broke a new record yesterday, flying through $4600. The price has been meteoric since the currency was split at the beginning of this month. Beyond that, it is also up over 350% year-to-date.

Strangely enough, some investors are starting to see Bitcoin as a safe haven asset like gold as geopolitical tensions begin to rise. Part of this stems from its relative neutrality in terms of both politics and central bank interventions.

According to data published by CoinDesk, the price of a Bitcoin is up 68% month-over-month. The total value of all the mainstream cryptocurrencies, including Ethereum and Ripple, has been estimated at $160 billion.

The recent rise in the price of Bitcoin, from $1985 per coin in mid-July, has been driven in no small part by the sabre rattling going on between North Korea and the United States. Bitcoin was already a popular trade in Asia, and anecdotal evidence gathered by The Armchair Trader from wealth managers and hedge funds suggests that it has been used as an alternative route by Chinese investors to bounce cash into other asset classes without attracting too much attention from Chinese regulators (and tax officials).

However, just as gold has gained ground this August, so has Bitcoin. It is likely some investors are even buying both, diversifying their safe haven ploy even further.

Beyond Korea, investors are also expectant of more intervention from the Federal Reserve. With the US stock market at all time highs, investors are aware that the Fed has to do something about its balance sheet. We think the Fed is playing straight with the markets, and that we’ll see more interest rate rises at regular intervals over the next 12 months. This will not be good news for US equities investors, hence why some are probably already moving money into gold…and Bitcoin.

Bitcoin Cash

More product providers are starting to offer the scope to trade the Bitcoin price like another currency, as it begins to gain wider acceptance by traders and investors. Bitcoin Cash, on the other hand, has not been doing so well. While some providers – albeit very niche ones – are going to quote Bitcoin Cash prices, most of the smart money is staying with BitCoin.

Bitcoin Cash was born this summer on the back of a disagreement about how Bitcoin ought to be mined.  The secessionist ‘miners’ of Bitcoin Cash have gone their own way, and that price has begun to perform independently of Bitcoin. Bitcoin Cash is effectively now its own currency. Analysts have been watching it closely in August and trying to make some sense of it, while Bitcoin original flavour has pushed into record territory.

Should we be worried that Bitcoin is perhaps overheating?

“I am not any more concerned with Bitcoin being at a record high than Amazon or Google investors were concerned when those share prices jumped hundreds of a percent and hit $100 or $200 many years ago,” says Ronnie Moas of Standpoint Research. “Today, both of those stocks are over $900. The question is now where we are at – it is where we are going. I do not think we are in a bubble.”

 

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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