Investors turn to bitcoin as haven from Greek woes
Bitcoin has been boosted by small European investors during the turmoil over Greece, as dealers of digital currencies position them as a possible haven alternative to traditional ones like gold.
The price of digital currency bitcoin has risen 7 per cent since Friday to its highest level since March at $260, while gold is down 1 per cent trading flat at $1,169 a troy ounce.
Thanos Marinos, the founder of Greek bitcoin exchange BTCGreece, said he has seen the number of newly registered customers in the country increase by 600 per cent in the past few weeks. In the last seven days more than 150 clients have registered every day, he said.
“That has to do with the fact we’re the only exchange available at the moment for the Greeks to buy bitcoin,” he said. “Nobody can make any payments outside of Greece due to the capital controls.”
Still, Mr Marinos said he had limited the amount a person could deposit to buy bitcoins to €250 a day from €1,000, to avoid the impression he was helping people get money out of the country.
Bitcoin demand has also picked up elsewhere in Europe. Coinbase, a bitcoin exchange, said on Twitter it had seen about a 300 per cent increase in bitcoin buying across Europe in the past few weeks, though not much from Greece itself. The company cut its fees on purchases of bitcoin in euros for this week.
“We’ve definitely seen a pick-up in interest,” Mark Lamb, founder of London-based bitcoin exchange Coinfloor, a separate bitcoin exchange, said. “Greeks aren’t necessarily buying bitcoin in droves because of the capital controls but countries all around Europe are buying bitcoin in response to the Greek events.”
Gold is a much bigger market than bitcoin, with the investable market estimated at more than $2tn. Bitcoin, in contrast, has a market capitalisation of only $3.7bn.
Institutional and larger investors seem to have cooled on gold’s traditional role as a haven investment, which is supposed to hold its value during times of political and economic turmoil. Gold exchange traded funds have only seen holdings rise by 0.1 per cent over the past week, according to Bloomberg.
Gold’s reaction to uncertainty has changed, with one factor being a general “desensitisation” in the market over the past few years and headline fatigue, according to UBS. It will take a lot more to trigger gold haven buying, it said.
“Unless there is a rapid deterioration in the situation in Greece in the coming days and weeks, it’s difficult to see gold having a more notable reaction,” analyst Joni Teves wrote in a research note.
Still, there is little talk of bitcoin being able to offer similar diversification benefits to gold, Mark O’Byrne, founder of gold broker GoldCore, said. The risks of holding bitcoin are also greater, he said, pointing to the shutdown of MTGox, the Tokyo-based exchange, in February 2014 after it said it had lost track of 850,000 coins worth $500m.
“Some of them are hoarding it and seeing it as a potential store of value, but the jury is out on that still,” Mr O’Byrne said.
In Europe, retail buying of physical gold has been stronger this year, according to Adrian Ash, head of research at BullionVault, an online gold exchange for private investors.
Inflows of euros to buy gold or silver rose 35 per cent from January to June, he said, with growth in Italy, Germany, France, Austria and Belgium.
“What moves the gold price is when large, real money starts to fly in from other assets and at the moment we’re not seeing that,” he said. “But in terms of retail you’ve seen a turnround.”