Aoifinn Devitt, a senior investment advisor at Moneta, has expressed concerns about the widely-held belief that cryptocurrencies, such as Bitcoin and Ethereum, can serve as a safe haven during times of economic instability.
In the recent market downturn, which saw Ethereum drop by 27%, Devitt emphasized that cryptocurrencies are highly speculative and should be classified as “risk-on” assets. She believes that the inherent volatility of these digital assets makes them unsuitable for investors seeking stability in turbulent markets.
Devitt refutes the idea that cryptocurrencies could withstand a financial crisis like traditional safe haven assets. She stated, “We do not yet have enough comprehensive data to assess how they would perform in a serious market downturn.”
Her skepticism stems from the lack of understanding regarding how crypto assets respond to key economic factors, such as inflation and interest rates. While some argue that Bitcoin could act as a form of digital gold, Devitt does not share that viewpoint. She noted, “Bitcoin might offer some protection against the depreciation of fiat currencies, but it is far from being the secure hedge that some imagine it to be.”
Devitt also highlighted the enduring strength of fiat currencies, particularly the U.S. dollar, which continues to dominate despite Bitcoin’s appeal. She added, “There does not appear to be significant demand for alternatives to the dollar at the moment.”
Regarding the increasing popularity of Bitcoin, Devitt acknowledged that it is less volatile than other digital currencies, making it a more attractive entry point for risk-tolerant investors. She explained, “If you are venturing into crypto but prefer a less erratic option, Bitcoin is probably the place to start.”
Although Bitcoin ETFs are helping to bring cryptocurrencies into the mainstream, Devitt cautioned that this increased accessibility does not guarantee greater safety. She concluded, “The crypto market may be more liquid and accessible now, but it is still not a reliable safe haven.” She advised conservative investors seeking security to be cautious as the landscape remains too unpredictable.