As it became clear late yesterday and into Friday morning that Britain was indeed voting to leave the European Union, the Bitcoin price got a very clear boost.In the six hours or so from when the results started to trickle in (about 7 p.m. EDT) until it was obvious that the Brexit had become a reality, the Bitcoin price spiked about 8.8%, jumping from about $625 to nearly $680. Today, the price of Bitcoin has fallen back to about $650.This roughly mirrored the surge in gold, which rose as much as 8% before retreating somewhat.That the Bitcoin price behaved much like gold in response to the Brexit news should not be surprising, but that kind of correlation actually has been rare.TradeBlock, a web-based cryptocurrency data provider, analyzed the one-year correlation of gold and Bitcoin at the end of January. TradeBlock found that Bitcoin had a pronounced inverse relationship with gold – not what you'd expect from two "safe-haven" investments.The correlation coefficient was -0.70. Correlation coefficients are measured on a scale from 1.0 to -1.0, so -0.70 means that the price of gold and the price of Bitcoin mostly moved in opposite directions.That's probably because the financial world has been slow to accept Bitcoin as a safe haven in the tradition of precious metals like gold and silver. After all, Bitcoinhas only been around since 2009, while gold has served as a store of value for thousands of years.But that's been changing…
Why the Bitcoin Price Behaved More Like Gold This Time
The global financial community has come around to viewing Bitcoin as a transformational technology, and not so much a tech novelty, so the next logical step is for it to be thought of as a kind of "digital gold.""This is Bitcoin's coming out party as a global safe-haven investment. Amazing," tweeted Barry Silbert, founder and CEO of the Digital Currency Group and the creator of the Bitcoin Investment Trust.This idea isn't new to the Bitcoin community, but until now we haven't really seen it manifest in the Bitcoin price."Changes in investor psychology about safe havens, at the margin, will make an impact on the Bitcoin market," said Darin Stanchfield, CEO of Bitcoin hardware wallet KeepKey. "This starts a feedback loop, where investors see how prior events affected the Bitcoin price and decide to seek some exposure to Bitcoin, which in turns drives up its price. We saw early signs of this back in 2013 during the fear of a U.S. government shutdown, and then again last summer during the Greek bailout referendum. Over time, perception becomes reality."For investors, this means Bitcoin has become one more alternative to traditional safe-haven assets such as gold, silver, and U.S. Treasuries.
Why Bitcoin Is an Excellent Safe Haven
Bitcoin is ideal protection from the destructive policies of central banks and fiat currencies that continue to lose value."People may be waking up to the realities of fiat currencies and debt economies," said Ned Scott, CEO of Steemit, a social media platform built around the Steem cryptocurrency. "Centralized, debt-based economies and their currencies come with risks, such as bail-ins and bail-outs, that digital currencies protect consumers from."And as the Brexit vote has demonstrated, Bitcoin also offers protection from black swan events.Of course, investors shouldn't go overboard. Most experts recommend holdings in gold, for example, at about 5%, and certainly less than 10%.If you choose to add Bitcoin to your portfolio, it should be no more than 5%. While it has many of the advantages of gold, Bitcoin is much more volatile, and so more risky.Follow me on Twitter @DavidGZeiler or like Money Morning on Facebook.How to Invest in Bitcoin: Beyond its utility as a safe haven, Bitcoin has proven itself a remarkable investment, with a compound annual growth rate of more than 80% over the past three years. To find out how to add this "digital gold" to your portfolio, check out this Money Morning Guide to How to Buy Bitcoins…Join the conversation. Click here to jump to comments…
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By Money Morning ResearchA little over two months ago, we revealed this incredible story for the first time ever.With no Wall Street experience or fancy Ivy League degree, a chemical engineer accidentally uncovered a powerful pattern that allowed him to quit his job at DuPont and create more wealth than he ever dreamed possible.And it could forever change the way you look at investing and the markets.It appears about once a week, often before a stock's share price doubles or even triples.When we first revealed this pattern, we knew it would instantly change lives…But we weren't prepared for just how quickly it would happen.In roughly three months using this pattern, our top recommendations have produced an unheard of five triple-digit windfalls including most recently a 245% winner in just three days on June 27. That's on top of six double-digit winners.The point of this edit was to work in that these are our best plays since we're cherry-picking and the rest of the plays were actually losses.And today, the man who discovered this pattern – a man you might recognize as a former hedge fund legend – has a big announcement to make.You see, the pattern has just appeared in two more specific stocks that are set to explode.And this time, he's determined to make sure everyone gets a chance at these potential windfall profits.