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A collection of bitcoin tokens are displayed in this picture illustration.

Benoit Tessier/Reuters

Bitcoin’s recent gains as stocks plummeted on U.S.-China trade tensions reflect not so much its safe-haven credentials but its potential for quick gains, cryptocurrency and foreign exchange traders said on Tuesday.

The biggest coin jumped more than 7 per cent on Monday as U.S. stocks slumped 3 per cent. Safe-haven assets from the Japanese yen to gold to government bonds – expected to hold or gain value amid turbulent markets – also rallied as investors fretted over the impact of the trade war on the world economy.

Crypto-enthusiasts said the moves heralded bitcoin’s achieving its potential as a haven. Bitcoin, their argument goes, is immune to the impact of geopolitical tensions or government interference because of its decentralized nature.

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Unlike government-issued fiat money, bitcoin is produced by miners across the world racing to solve computer puzzles. Its supply is also capped at 21 million, a scarcity aficionados say gives it an innate value, like rare metals.

And the correlation between falling stocks and rising bitcoin does appear to hold.

After major market-moving events over the past year, including U.S. President Donald Trump’s threat last week to slap more Chinese imports with tariffs, bitcoin has jumped as stocks tumbled.

Since Mr. Trump’s threat on Thursday, bitcoin has soared 23 per cent versus a 4.6-per-cent slump in the S&P 500. A week after the President tweeted in May that he would raise tariffs, bitcoin rose 41 per cent against a 3.8-per-cent fall in U.S. stocks.

And when worries on a hawkish U.S. Federal Reserve amid escalating trade tensions and weakening future corporate earnings growth upset markets in December, bitcoin added 18 per cent against a 10-per-cent drop for stocks in a week.

In times of market fluctuations, investors tend to move small proportions of their portfolios to bitcoin, said Marcus Swanepoel, chief executive of London-based cryptocurrency platform Luno.

But driving bitcoin’s moves is less its safe-haven characteristics than its potential for outsize gains, he added.

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“If you’re wrong, you’re not losing lots of money, but if you’re right we are talking outsized returns,” Mr. Swanepoel said.

Like gold, bitcoin has also tended to move in concert with market volatility.

But any correlation with the behaviour of traditional safe havens is likely more a short-term trend that an indication of anything longer-term, according to Forex.com analyst Fawad Razaqzada.

Bitcoin’s record of hacks and heists also undermines its credentials as a kin to gold, he said, adding that it does in theory have the potential to act as a haven.

“If exchanges solve the issue of cybersecurity, it could in the longer term be seen as a safe haven,” he said.

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