A few years ago, many within the cryptocurrency community regarded Bitcoin as a “safe-haven” asset. Today, that sentiment has diminished.
A safe-haven asset is one that preserves or appreciates in value during times of economic turmoil. This can include government bonds, currencies like the US dollar, commodities such as gold, or even blue-chip stocks.
The ongoing global tariff disputes initiated by the United States, along with concerning economic indicators, have led to significant declines in equity markets, and surprisingly, Bitcoin has followed suit—contrary to its status as a “risk-off” asset.
Bitcoin’s performance has lagged behind gold as well. “While gold prices have risen by +10%, Bitcoin has decreased by -10% since January 1st,” reported the Kobeissi Letter on March 3. “Crypto is no longer seen as a safe haven option.” (Bitcoin’s decline continued last week.)
However, some market analysts believe this change was anticipated.
Price chart for Bitcoin (white) and gold (yellow) from Dec. 1 to March 13. Source: Bitcoin Counter Flow
Was Bitcoin Ever a Safe Haven?
“I have never considered BTC as a ‘safe haven,’” stated Paul Schatz, founder and president of Heritage Capital, a financial advisory firm, in an interview with Cointelegraph. “The volatility of BTC is simply too extreme to categorize it as a safe haven, though I do advocate for a general allocation to this asset class.”
“To me, Bitcoin remains a speculative asset, not a safe haven,” remarked Jochen Stanzl, Chief Market Analyst at CMC Markets (Germany), to Cointelegraph. “Unlike gold, which has an intrinsic value that cannot drop to zero, Bitcoin can plummet by 80% in significant corrections. I wouldn’t expect that from gold.”
Buvaneshwaran Venugopal, an assistant professor in the finance department at the University of Central Florida, stated, “In my view, crypto, including Bitcoin, has never been a ‘safe haven play.’”
Nonetheless, the narrative around cryptocurrencies can be complex.
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It could be argued that there are varying types of safe havens: one category for geopolitical crises such as wars and economic recessions, and another for purely financial disturbances, like bank failures or a weakening dollar.
The perception of Bitcoin might be shifting. Its incorporation into exchange-traded funds launched by major asset managers like BlackRock and Fidelity in 2024 has expanded its ownership base but may also have altered its narrative.
It is increasingly viewed as a speculative or “risk-on” asset similar to technology stocks.
“Bitcoin, along with the entire crypto market, has become highly correlated with riskier assets and often moves inversely to safe havens like gold,” noted Adam Kobeissi, editor-in-chief of the Kobeissi Letter, in an interview with Cointelegraph.
There is considerable uncertainty surrounding Bitcoin’s trajectory, he continued, driven by “increased institutional involvement and leverage,” alongside a shifting narrative away from Bitcoin being considered “digital gold” towards a more speculative asset.
Some may assume that the involvement of traditional financial giants like BlackRock and Fidelity would bolster Bitcoin’s future stability, thus reinforcing its safe haven narrative—but Venugopal disagrees:
“The entry of large companies into BTC does not imply it has become safer. In fact, it suggests BTC is evolving into an asset that institutional investors typically favor.”
This implies that Bitcoin will be more susceptible to the conventional trading and draw-down strategies employed by institutional investors, Venugopal added. “If anything, BTC is now more correlated with risky market assets.”
Bitcoin’s Dual Nature
Many observers acknowledge that Bitcoin and other cryptocurrencies remain subject to significant price volatility, fueled recently by increased retail adoption of crypto, especially due to the memecoin phenomenon, which Kobeissi described as “one of the largest crypto-onboarding events in history.” However, focusing solely on this aspect might miss the bigger picture.
“Safe havens are typically long-term assets, meaning that short-term volatility does not impact that designation,” explained Noelle Acheson, author of the Crypto is Macro Now newsletter, to Cointelegraph.
The critical question is whether Bitcoin can maintain its value over the long term against fiat currencies, and so far, it has managed to do so. “The data supports its validity—over any four-year span, BTC has outperformed gold and US equities,” stated Acheson, who continued:
“BTC embodies two crucial narratives: it serves as a short-term risk asset, sensitive to liquidity preferences and overall sentiment, while also acting as a long-term store of value. It can embody both roles as we are witnessing.”
Another possibility is that Bitcoin could function as a safe haven in some scenarios but not in others.
Geoff Kendrick, global head of digital assets research at Standard Chartered, expressed that he views Bitcoin as a protection against failures in traditional finance, much like the aftermath of the Silicon Valley Bank and Signature Bank crises two years ago, along with “US Treasury risks.” However, he noted that for specific geopolitical events, Bitcoin might still behave like a risk asset.
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Gold serves as a hedge against geopolitical disruptions, such as trade wars, while both Bitcoin and gold provide protection against inflation. “Thus, both serve as valuable hedges within a portfolio,” Kendrick added.
Some, including Cathie Wood of Ark Investment, concur that Bitcoin acted as a safe haven during the bank runs involving SVB and Signature Bank in March 2023. When SVB collapsed on March 10, 2023, Bitcoin’s price was approximately $20,200, according to CoinGecko. A week later, it surged to nearly $27,400, marking an increase of roughly 35%.
BTC price dipped on March 10 before rebounding a week later. Source: CoinGecko
However, Schatz does not consider Bitcoin a hedge against inflation. The events of 2022, with the collapses of FTX and other crypto entities leading to a crypto winter, have “significantly undermined that theory.”
Could Bitcoin act as a hedge against the US dollar and Treasury bonds? “That’s a possibility, but it’s a grim thought to entertain,” Schatz noted.
No Room for Overreaction
Kobeissi concurred that short-term fluctuations in asset classes “often hold little significance over an extended period.” Despite the current downturn, many of Bitcoin’s fundamentals remain strong: a pro-crypto US government, the establishment of a US Bitcoin Reserve, and a rise in crypto adoption.
The crucial question for market participants is: “What is the next significant catalyst for a continued upward trend?” Kobeissi stated to Cointelegraph. “This is why markets are consolidating and pulling back: they are in search of the next key catalyst.”
“From the moment macro investors began recognizing BTC as a high-volatility, liquidity-sensitive risk asset, it has functioned as such,” added Acheson. Furthermore, “it is predominantly short-term traders who determine the last price, and if they are rotating out of risk assets, we will witness BTC weakness.”
Overall market conditions are shaky. There is “the looming worry of renewed inflation and a potential economic slowdown” that heavily influences Bitcoin’s pricing. Acheson further remarked:
“Given this scenario, and considering BTC’s dual characteristics as both a risk asset and a long-term safe haven, I am surprised it hasn’t fallen more.”
For his part, Venugopal contends that Bitcoin has not served as a short-term hedge or safe haven since 2017. Regarding the long-term perspective that Bitcoin is digital gold due to its supply cap of 21 million BTC, this only holds if a significant number of investors collectively expect Bitcoin to increase in value over time, and “this expectation may or may not be valid.”
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