In light of the global banking crisis and its repercussions on the traditional banking sector, it seems that Bitcoin is “a safe haven now,” as Reuters put it.
However, regarding this safe haven as an alternative to banks and traditional banks, whether in front of individuals or governments, economists differed regarding it, between those who believe that digital currencies represent a revolution and their use should be generalized, and those who fear their volatility and question their ability to continue to rise and outperform traditional banks.
The cryptocurrency, which is notorious for its volatility, has been indicated by a number of economic reports and newspapers, according to Reuters, that it is now returning to the fore positively and vitally in light of the current banking meltdown.
Bitcoin rose 21% in March, while the volatile Standard & Poor’s 500 index lost 1.4%, and gold gained 8%, according to Reuters.
The cryptocurrency has, at the present time, severed its ties with stocks and bonds, and has become competitive with gold, in terms of value, and this fulfills at least one part of the dream of the creator of Bitcoin, Satoshi Nakamoto, which is that the currency of Bitcoin is a refuge for suffering investors, according to the agency.
Sell-offs by customers caused banks to lose hundreds of billions of dollars and forced US regulators to take emergency action. The past two weeks have seen the collapse of Silicon Valley bank and cryptocurrency lender Silvergate, while Credit Suisse has teetered on the brink.
Karim Saad El-Din, a professor of economics at the American University in Cairo, explains to Al-Hurra the basic idea behind Bitcoin, saying that it was issued in 2009 after the global financial crisis in 2008 as a revolution in the face of central banks that destroy the world economy more than it benefits because of capitalism. And to be a competitor to gold, but in the form of a cryptocurrency.
The basic Bitcoin revolution, from Saad El-Din’s point of view, was that it could not be controlled by governments or banks, and therefore it was a free outlet and a great way for ordinary people around the world to enter the world of investment and speculation without being rich or businessmen or being under control of their governments or the global financial system in the first place.
But this freedom did not last long, according to the economics professor, who said that in recent years, large investment funds have decided to invest in bitcoin and other cryptocurrencies.
He pointed out that these currencies have already achieved overwhelming success and a huge rise due to the global crisis in the markets that occurred due to the “Covid-19” epidemic, and reached a record level of $ 68,000 in November 2021, but after governments’ attempts to reduce global inflation rates by raising rates. Interestingly, the value of bitcoin collapsed to $18,000 in November 2022.
The economics professor affirms his conviction in the future of these cryptocurrencies in the face of central bank interventions and global market fluctuations, which he believes will last for years to come.
However, he indicated that this vision will be determined after it becomes clear if the bullish trend for bitcoin will continue after the Federal Reserve meeting, this week, as the US central bank will seek to follow two paths: fighting inflation at the local level, and pressures from banks at the local and global levels.
According to Reuters, bitcoin now commands nearly 43% of the total cryptocurrency market, its highest share since last June, according to CoinMarketCap data, while total cryptocurrency market capitalization jumped 23%. to $1.1 billion, since March 10.
On the other hand, the financial expert in an Egyptian bank, Mohamed Hosni, questions Bitcoin’s ability to continue rising, telling Al-Hurra that after the end of the “Covid-19” period, Bitcoin collapsed, causing the loss of most of its traders, and is no longer relevant. It has value, whether in keeping or trading it, and it is limited to being just an indicator of the fluctuations of global markets.
Hosni attributes the reason behind the recent rise in bitcoin to the growing expectations that the US Federal Reserve will not be able to raise the interest rate now, after the crisis in the global markets.
He believes that “the decline of Bitcoin is inevitably coming, especially since what is happening in the global markets is considered temporary.”
The financial expert explained that everyone warned of the previous collapse of Bitcoin as a volatile currency, noting that despite the desire of some to buy this cryptocurrency, attention is still turning to the state of traditional global markets, and once it is stable, investors will rush after it again.
Reuters indicated that the rapid rise in bitcoin prices forced some sellers to cut their bets and buy back regular coins. Data from Coinglass shows that traders liquidated $300 million worth of crypto positions, Monday.
Therefore, the financial expert believes that it is too early to say now that Bitcoin may be an alternative in the global banking crisis.
