Over the last week were BTC fall, bitcoin lost 17.96% of its value and fell below $36 thousand. At the same time, institutional investors remembered gold as a hedging instrument.
Bitcoin mania and tulip mania: what do they have in common
According to the report of investment company TS Lombard, cryptocurrencies are still unstable assets and can lead to loss of money. In particular, analysts attribute the recent drop in the price of the asset to the large amount of speculation in the market by small investors. TS Lombard compares such behavior of cryptocurrency holders with tulip mania, which broke out in the Netherlands in 1636, when residents began to buy tulip bulbs in droves, succumbing to the general mood of the market.
As experts explain, people accumulated enough money during the COVID-19 pandemic and decided to invest it in a speculative asset, hoping for a quick profit. A similar situation was observed in the Netherlands.
As TS Lombard analysts themselves say, many large and small investors have invested in cryptocurrency with the hope of hedging the risk of currency inflation. But as practice shows, digital coins can’t yet be considered a protective asset, unlike gold.
“Because investors are concerned about medium-term inflation risks, they should probably hedge this threat using traditional securities, such as gold futures and various sub-sectors of the stock market, rather than digging into volatile crypto-assets,” the report said.
Note that the price of gold is indeed rising against the backdrop of the fall of the crypto market. At the time of writing, the price of a troy ounce of gold was $1883.
Investors believe in Ethereum more than in bitcoin cause of BTC fall
Although TS Lombard analysts consider crypto-assets to be speculative, research proves that investors are interested in buying Ethereum tokens. The main reason businesses are interested in EtN tokens remains its technical capabilities. In particular, this refers to the blockchain, which is ready “to provide a base for a completely new global financial infrastructure and has many potential applications beyond using the token as a ‘safe asset,'” the report says.
Experts believe it will be Ethereum that will soon become the focus of investor attention, with bitcoin receding into the background.
“By buying ethereum, institutional investors are likely buying a ‘ticket’ to access the programmable technology behind it,” TS Lombard concluded.
Note that ETN has recovered above the $2,000 mark and is trading around $2,300 at the time of writing.