Bitcoin is becoming a safe haven and institutions are taking notice – Anthony Georgiades of Innovating Capital

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(Kitco News) – Bitcoin (BTC) saw a strong rally over the past month, hitting a 12-month high around $31,000 on April 14th as Ether (ETH) enjoyed its post-Shapella rally. According to Anthony Georgiades, co-founder of Pastel Network and General Partner at Innovating Capital, BTC’s recent move shows that the number one cryptocurrency is maturing and evolving as an asset, which could change how it reacts to future economic events.

“The breakout really started after the banking problems started to unfold, and it was quite fascinating,” Georgiades said. “There are really a couple of paradoxical factors that represent both the past, where Bitcoin’s value has been largely speculative in demand, and the future, where Bitcoin really started to step into its role as the safe haven.”

Georgiades told Kitco News reporter Ernest Hoffman that Bitcoin’s price movements are becoming more complex as different investors use it for different purposes.

“In one instance, we saw this kind of de-dollarization, consumers, institutions, investors losing confidence in the dollar, in traditional financial institutions, and seeking alternative safe-haven assets like Bitcoin to serve as this hedge against instability, against the potential risk of collapse in the established financial system,” he said. “On the flip side, you also saw some of its speculatively driven nature. You had the Fed’s overall lending program to the banks, which reversed much of the quantitative easing that the Fed had put in place to curb inflation.”

“So you had a little bit of driven demand from both functions.”

Georgiades said the recent selloff could be markets realizing we’re not out of the woods yet. “Bitcoin still reacts to the nature of risk that it was born out of, and has really behaved like it for the last decade plus.”

He said another area worth watching is the growth of institutional interest in Bitcoin, which has become more apparent in recent weeks. “If you look at the height of 2021 and the height of the market, you didn’t necessarily see institutions diving into Bitcoin as a speculative asset,” he said. “You’ve seen it in the last few weeks and you continue to see it. It was the institutional interest in acquiring and holding Bitcoin as a safe haven for hedging against the dollar, against the financial system.”

Georgiades said Bitcoin is also benefiting from the de-dollarization trend unfolding internationally as well as in the United States.

“Bitcoin is becoming much more understandable, what it is and what it is not,” he said. “The ability to self-storage, the ability to own an asset that is not susceptible to monetary policy, whether you want to call it manipulation or features that are driven by a number of factors, Bitcoin continues to exist on its own. It is, by the SEC standard, sufficiently decentralized . What is another asset that truly possesses that quality and property?”

In the current environment, with significant risks to growth as well as persistent inflationary pressures, Georgiades said predicting Bitcoin’s response to key economic indicators is very difficult.

“There’s a couple of things going on right now, and first, just in terms of these features, is it risk-on or is it risk-off? It’s more complicated than that, it’s not that binary,” he said. “If you look at emerging markets, Bitcoin has behaved like a risk-off, safe haven. If you look at established economies, Bitcoin has acted as a risky asset.”

He said that with key US economic indicators, Bitcoin is likely to react positively to indicators supporting more easing and more speculative asset growth. “If we see inflation start to fall, or we see GDP growth come in lower than expected, we’re probably going to intuitively believe that the Fed’s policy has worked and that they might not need to raise as much, or that they might not need to carry the accumulated weight of these rate increases for as long as we first thought,” he said.

“If these things happen, we’re likely to see a continued rally in all risk assets.”

To hear Georgiade’s views on crypto regulation and how Bitcoin might react to US inflation and growth indicators, watch the video above.