Was Bitcoin Ever Meant To Be A Safe-Haven?

Why did the crypto market vastly underperform today?

Has Bitcoin lost its safe-haven status?

Was it ever a safe-haven to begin with?

Let’s address the elephants in the room (hello there), and then address these prevalent questions.

Let’s first remember that the digital asset market is still highly speculative and conditions can turn on a dime, but taking a step back we are beginning to see some maturation as the level of sophistication across investors and traders increases.

The latest rally in the crypto market is quite a bit different from what we saw last year when BTC led most alternative crypto assets. Bitcoin has actually had its worst start to a year ever in terms of dominance, dropping from nearly 70% of the market down to 61% at one point.

The shift in leadership this year has favored other large and mid-cap names, many of which drastically underperformed BTC over the last year.

Let’s also remind ourselves how assets that are overbought and have had the largest recent gains are the ones that have the furthest to fall before finding meaningful support. That’s why, of the top ten, BTC dropped the least today — excluding Tezos.

Now let’s discuss the misguided safe-haven narrative. 

In the past, there have been a number of catalysts in the geopolitical space that have caused stocks and traditional markets to take a dip, and the resulting effect for Bitcoin has been positive. This was seen most recently when the threat of a US-China trade war loomed. 

Additionally, with many central banks enacting policies to try and prop up their suffering economies, investors have been seeking out safe-haven investments in the fear of a recession. This too has been positive for Bitcoin as it often, but not always, correlated to gold. 

The coronavirus fear was another area that looked to be boosting Bitcoin’s safe-haven properties in the early stages of the outbreak, but as the virus has now started affecting the global markets and global supply chain negatively, it is concerning to see Bitcoin dropping with everything else.

It may well be that Bitcoin has certain properties that make it a safe haven, but its broad scope, acting as a currency or an asset or a store of value, makes it hard to categorize and for investors to see a worthwhile investment, given the volatile risk. It is also still a very nascent market and for it to act with any degree of certainty is erroneous. 

Bitcoin can, of course, offer safe haven investing in certain instances. This is why we like to refer to it more as hedge — be that a reflation hedge, crisis hedge, or central bank hedge. 

However, it still is a highly volatile asset and is still dependant on continued relevance in an ever-changing world. While Bitcoin has for its majority been on an upward trend, it can dip widely, and at times when many do not expect it to.

So, let’s be clear: 

Bitcoin was never meant to be a safe-haven.

Bitcoin is not the USD. 

Bitcoin is not gold. 

Bitcoin is Bitcoin, and represents an early vision of a destiny not defined by existing conventions or labels (digital gold, digital dollar), but rather one defined by the collective will of the network participants and the code at its core. 

Short coronavirus, long Bitcoin.