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Is Bitcoin rivalling gold as a new safe-haven investment?

by , 13 July 2015

If you're a follower of Bitcoin, you may have noticed that its price has been climbing. This rise in price has coincided with the Greek debt crisis.

So is there a link between the price of Bitcoin and the situation in Greece?

Let's take a closer look…

The price of Bitcoin has been climbing

At the end of June, Bitcoin made a strong move upwards, just as the crisis in Greece deepened.

Have a look at the chart below of the climbing Bitcoin price…

Chart of Bitcoin price

For the month of June, the price of Bitcoin rose 20%. And the digital currency has continued its climb. Today one Bitcoin is valued at nearly $285.

The rise coincided with the crisis escalating in Greece as its government imposed capital controls and closed its stock market, explains David Zeiler in Money Morning US.

A financial crisis like this is behind the creation of Bitcoin. This decentralised digital currency is beyond the controls of currencies. Bitcoin looks like its achieving safe haven status.

The largest Bitcoin exchanges reported a large increase in customers from Greece. For example, Bitstamp, the third largest exchange said “trades were up 79% over their 10 week average”.

But delving a bit deeper, with such a small market share and with Greek people not having access to cash to buy Bitcoin, this increased interest in Bitcoin can’t solely be behind the rise in price.

The benefits of investing in Bitcoin

With the Greek crisis making headlines around the world, it showed how easy it is for a government to impose capital controls. And this raises doubt about holding your cash in the bank in the event of a financial crisis.

Investors worried about these sorts of events can see the merits of holding some money in Bitcoin, as an insurance against financial crisis.

At the end of June, Bitcoin wallet company Coinbase tweeted that it had seen “a 300% increase in Bitcoin buys” across the whole of Europe over the past few weeks.

It appears that investors are starting to view Bitcoin as a safe haven investment, just like gold is. But Bitcoin has advantages over gold. It’s easier to spend and you can easily bypass capital controls.

So there you have it. Why Bitcoin could be rivalling gold as a new safe-haven investment.

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Is Bitcoin rivalling gold as a new safe-haven investment?
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