Market Volatility Raises Doubts on Cryptocurrencies as Safe Haven

Aoifinn Devitt, a senior investment advisor at Moneta, has raised concerns about the widely-held belief that cryptocurrencies, including Bitcoin and Ethereum, can act as a safe haven during times of economic instability.

In light of the recent downturn, which saw Ethereum drop by 27%, Devitt made it clear that cryptocurrencies remain highly speculative, classifying them as “risk-on” assets. She believes that the volatility inherent in these digital assets makes them unsuitable for investors seeking stability in turbulent markets.

Refuting the notion that cryptocurrencies could weather a financial storm like traditional safe haven assets, Devitt stated, “We don’t yet have enough comprehensive data to assess how they will behave if the market takes a serious downturn.”

Her skepticism is rooted in the lack of understanding regarding how crypto assets respond to key economic factors such as inflation and interest rates. While some claim that Bitcoin could act as a form of digital gold, Devitt doesn’t see it that way. “Bitcoin might provide some form of protection against fiat currency depreciation, but it’s far from the secure hedge some imagine it to be,” she noted.

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Devitt also highlighted the enduring strength of fiat currencies, particularly the U.S. dollar, which continues to dominate despite Bitcoin’s appeal. “There doesn’t seem to be significant demand for alternatives to the dollar at the moment,” she added.

As for the growing popularity of Bitcoin, Devitt acknowledged that Bitcoin remains less volatile than other digital currencies, which may make it a more attractive entry point for risk-tolerant investors. “If you’re venturing into crypto but prefer a less erratic option, Bitcoin is probably the place to begin,” she explained.

While Bitcoin ETFs are helping to bring cryptocurrencies into the mainstream, Devitt warned that this increased accessibility doesn’t equate to greater safety. “The crypto market may be more liquid and accessible now, but it’s still not a reliable safe haven,” she concluded, cautioning that the landscape is still too unpredictable for conservative investors seeking security.

Alexander Stefanov