“Bitcoin is not a safe haven (yet)” ~ “Nor is it a risk on or risk off asset”
The past week has been a long test of Bitcoin (BTC) as a safe haven asset as the stock market and crude oil dipped to record levels. The Saudi Arabia – Russia oil conflict compounded with the accelerated pace of the COVID-19 virus is flipping the global markets bearish with investors looking to safer assets.
However, BTC failed miserably in that aspect, dipping to two month lows, leaving analysts with a bitter taste and questions on whether the “digital gold” is ready to pick up the slack as a store of value (SoV).
The top cryptocurrency is currently trading just below the $8,000 key psychological resistance mark, after bouncing off key near term support at $7,940 USD to trade at $7,944, as at time of writing.
“Bitcoin is not a safe haven (yet)”
The role of BTC as a safe haven asset to investors is slowly diminishing after failing to protect users’ value in times of a bloodbath in traditional markets. Bitcoin’s biggest competitor in this regard, gold, which dipped only a percentage through the turmoil, is blowing BTC out of the water, but an analyst believes BTC has performed quite well.
Ari David Paul, managing partner and CIO at BlockTower Capital, wrote on Twitter,
“BTC isn’t a safe haven (yet). I’ve always predicted it would decline with a big equity sell off. Frankly, I’m very surprised at how well it’s held up. BTC up 7%+ on the year with equities down ~15%. We’ll have to see what happens, but darn good performance for a risky asset.”
CEO at Euro Pacific Capital and religious gold bug, Peter Schiff, however believes the concept of BTC as a safe haven has some way to go given the volatile nature of the asset. He replied,
Well if it’s a risk asset, why should it go up at all? The selling point is that it’s a store of value and safe haven. It’s only up so far this year because buyers bought into that nonsense. Soon its YTD decline will far exceed the losses in equities. What will you say then?
— Peter Schiff (@PeterSchiff) March 9, 2020
“BTC as an emerging asset”
Adding on to the debate, crypto analyst Joseph Young, said the value of BTC as a store of value is yet to mature – dismissing the concept of BTC as a volatility based or safe asset. He wrote,
“Bitcoin isn’t safe haven yet, but nor is it a risk-on or risk-off.”
Currently, Bitcoin is undergoing a massive growth phase with investors looking at potentially large returns in the future. However, BTC is also highly risky comparative to traditional “safe” assets as gold and precious metals. Young classifies BTC, a $150 billion USD asset as an ‘emerging asset’, writing,
“It’s an emerging asset, and will stay that way for a while.”