Bitcoin—a risk asset and safe haven—is worth owning at these levels, says Wolfe Research
Bitcoin: A Store of Value and a Risk Asset Worth Owning
Bitcoin has always been a fascinating asset for investors due to its dual nature as both a store of value and a high-risk asset. While this has often led to confusion and uncertainty, Wolfe Research believes that regardless of how it is perceived, Bitcoin is worth owning and traders should embrace the nuance.
Throughout this year, Bitcoin’s price has been shrouded in a cloud of uncertainty. It has remained within a narrow range of $25,000 to $30,000 and has oscillated between behaving like a risky tech stock and a form of digital gold. This fluctuation in narrative is not new for Bitcoin, and perhaps it is time for traders to embrace the idea that these two aspects are not mutually exclusive.
In a note released by Wolfe’s Rob Ginsberg, he stated, “A question we have often asked is whether BTC should be treated more like a risk asset or a storage of value such as Gold. The answer in our opinion is both.” Ginsberg further explained that while Bitcoin is highly correlated to small caps, indicating its nature as a risk asset, it also rallied during the banking crisis earlier this year, highlighting its role as a safe haven asset.
Bitcoin’s first significant rally this year occurred amidst the regional banking crisis in the United States. Investors flocked to Bitcoin as they rediscovered its appeal as an alternative banking system. Although Bitcoin was initially designed to be digital cash and an alternative financial system, it traded primarily as a speculative asset in 2022. However, following the closures of Silicon Valley Bank and Signature Bank, investors began to trade Bitcoin based on its core value proposition – the ability to “be your own bank.”
While Bitcoin has faced challenges reaching new highs, including regulatory hostility and uncertainty in the US, it has managed to hold steady above its key support level of $25,000 this year. Several positive developments, such as landmark legal cases and the race to launch the first spot Bitcoin exchange-traded fund (ETF), have contributed to this stability. Although it briefly dipped below $25,000 recently, it quickly rebounded, demonstrating its resilience.
Ginsberg finds encouragement in Bitcoin’s ability to remain resilient in the face of market volatility, stating, “While a significant drawdown from here would likely put pressure on the coin, we still have no problem owning it above the $25k support, which continues to act as a floor.” Considering the strong support below and the growing uncertainty in traditional markets, Ginsberg believes that Bitcoin is a viable option.
In conclusion, despite the ongoing debate about whether Bitcoin should be treated as a risk asset or a store of value, Wolfe Research suggests that traders should embrace the idea that it can be both. Bitcoin’s ability to act as a safe haven asset during times of uncertainty, coupled with its resilience above key support levels, makes it a worthwhile asset to own. As the market continues to evolve, Bitcoin’s unique characteristics and potential for growth make it an attractive option for investors seeking diverse investment opportunities.
