Bitcoin Safe-Haven Status Undermined

Bitcoin continued to consolidate within a descending triangle pattern in early trading on Thursday. Price fell as low as $9,502 before rebounding above the key psychological level of 10K.

After rallying while U.S. equities sank earlier in August, some analysts pointed to Bitcoin as an emerging safe-haven asset, highly correlated with escalating U.S./China trade war tensions. However, more recently the world’s largest cryptocurrency by market cap has traded lower along with equity markets. Meanwhile, traditional safe haven assets such as the Japanese Yen, the Swiss Franc and gold remained firm.

News of Facebook’s Libra cryptocurrency was a major force supporting Bitcoin’s rally in 2019. However, increasing regulatory scrutiny has put pressure on Libra and in turn Bitcoin. Most recently, data protection officials in the US, EU, UK, Australia and Canada have voiced fears over the “privacy risks” of Libra.

In July U.S. President Donald Trump, tweeted his beliefs about Bitcoin;

"I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity...."

U.S. Treasury secretary Steven Mnuchin added to the negative commentary, warning that cryptocurrencies pose a "national security" risk to the United States. Additionally, the IRS began to crack down in July by sending letters to 10,000 U.S. citizens who own cryptocurrencies that it thinks have failed to pay the appropriate taxes.