Is Bitcoin a Safe Haven?

In this article, I share my point of view on whether Bitcoins is a safe haven or not.

It is all over the news that the drums of war are beating in Europe once again with the start of the Russian-Ukrainian war.

One thing right off the bat, I am not focusing on politics in this article, but rather shedding light on the impact of this crisis on the asset Bitcoin, which is commonly touted by many as a safe haven.

But is that really the case?

Bitcoin as a Safe Haven

We can cut it short, the answer is clearly no. Bitcoin does not qualify as a hedge like gold, for example. Hedges offset losses of one position with gains of a second position.

David Ingles shared a pretty clear graphic on Twitter showing what happened to the price of gold and bitcoin when news of the Russian attack on Ukraine made the rounds.

However, Bitcoin disciples in particular often propagate Bitcoin as a currency hedge or financial market hedge. There were also some misinterpretation following a rally of Bitcoin later on that day.

However, this rally was parallel to the rally in the tech-heavy NASDAQ and diametrically opposed to the slump in gold. Obviously, investors assessed the situation as less dire than initially feared. Again, this is not about politics or my opinion, but purely about the behavior of the market.

Studies undermine the charts

In the meantime, however, there are already studies on the subject that also come to the same conclusion.

Kamran, Butt, Abdel-Razzaq and Djajadikerta show in their study about Bitcoin as hedge for various Australian stock indices that Bitcoin offered weak safe haven and hedging benefit.

My personal observations confirm this. Whenever there is a stock market crash, bitcoin moves accordingly. And also for the altcoins, which sometimes have revolutionary technological approaches, the movement pattern is the same as for bitcoin.

This is something that investors must be aware of. But besides that, Bitcoin is the best performing asset of the decade.

What is your opinion on Bitcoin? Is it a safe haven for you? Maybe it depends on your time horizon 😉

I’d be interested in your opinion, let me know it here or on Twitter.

Leave a Reply

Share via
Copy link