Bitcoin custodian BitGo CEO, Mike Belshe says bitcoin falling along with the stock market is good.
“That’s an indicator that Bitcoin is not a hedge against the stock market performing poorly, Bitcoin is not a hedge against coronavirus, bitcoin is a hedge against the US dollar and inflation,” he said.
Since mid-February bitcoin has been following the stock market to a deep fall in mid-March. The first wave was of flight to safety where stocks and Bitcoin fell together, explained Belshe.
What happened was the markets corrected and so did crypto. Crypto actually participated well because it is one of the most liquid assets, despite not having the depth of liquidity, it can be easily converted to cash.
Investors have been looking for cash anywhere they can get, that saw even gold dumping. In response to flight to safety, the central banks around the world “are all doing the only thing that they know how to do which is to print more money.”
But Belshe said this money hasn’t started flowing into markets yet and they are just anticipating what’s going to happen for now. As of yet, Bitcoin is “not fully out of the woods” but it will lift-off when this money actually enters.
“So, in the next two to four weeks you know let’s see what happens as that money gets circulated, that freshly printed supply. I think that we will see some change for crypto assets and we’ll see if its diversity correlates from equities,” Belshe said.
During this carnage, while retail interest sparked, institutional interest seemed to have taken a hit as regulated exchanges like CME and Bakkt recorded a decline in volume.
What’s holding the institutions back is a “little bit of uncertainty as to what the government’s going to do,” said Belshe as he explained that regulators got more power today than in the last ten years.
Now, “there’s some uncertainty as to what’s going to happen with crypto markets in terms of regulators saying hey we’re gonna try to protect our currency that we’re inflating even though these crypto assets might be a better safer place to be. I think that’s a losing battle in the end but it could have temporary impacts.”
Meanwhile, Social Capital CEO Chamath Palihapitiya who appeared on Anthony Pompliano’s The Pomp Podcast said this is exactly “the set up” for Bitcoin because “Bitcoin needed a moment like this for it to be relevant.”
Currently, the digital asset is still a speculative instrument and for it to replace fiat currency it needs to be way less volatile and come to the US dollar’s level.
High volatility means it is in the ”ghetto of day traders and speculators” and it needs to get out of that by flushing out those day traders and speculators and have some basis of interest from long-term holders, said Palihapitiya.
Bitcoin is “driving slowly but we are driving towards a top of a cliff and then we’re going to drive much much faster down that cliff, tore down that hill and at the end of it is a huge brick wall, the way we avoid it is by pivoting to a resilient economy.”
The Chairman of Virgin Galactic first bought “a lot” of Bitcoin in 2013, and had “almost 5% of all the bitcoin” at one point. He “never” bought any more BTC and now has its BTC stash with a company for safety and security purposes.
Bitcoin he said is a binary investment, “this is either zero or it’s millions because what it will do is it will create a quasi gold standard.”
It’s not gold but gold 2.0, “an instrument that has value, that’s determined by in between its participants and it’s owned by everybody,” Palihapitiya said.