Can Bitcoin Be Considered a Safe Haven Asset?

Bitcoin has been, over the course of its relatively short life, subject of much debate, particularly surrounding its use, utility, and reliability. However, this week we have seen analysts en masse question the leading cryptocurrency’s use as a safe haven asset and today we discuss this in detail.

What are safe-haven assets?

Traditionally, stocks have been favored by investors for their attractive returns, but equity markets are particularly vulnerable to global conflicts, economic turmoil, and recession. In times like these, equities perform poorly as their underlying fundamentals depend solely on businesses and industries, which are naturally impacted by trade wars, rising taxes, higher tariffs, and currency devaluations.

In order to protect their wealth in such scenarios, investors seek safe-haven assets, the most prominent of which is gold, while others include the Swiss Franc and government bonds. Of these assets share one major quality – they are stable stores of value during times when traditional markets are in decline.

What makes an asset a safe haven?

Safe-haven assets are characterized by their stability and insulation from traditional markets and currencies, including equities and the US dollar. 

The point of parking money in a safe haven asset is to preserve wealth. For example, a portfolio heavy on stocks will lose majorly during an economic meltdown as equities face steep declines. However, a healthy allocation of gold and stable currencies like the Swiss Franc can preserve value (since these assets have proven to hold their value much better).

Generally, safe havens are of two types, one which preserves value and one which even increases it. In our previous example, the Swiss Franc preserves wealth (by not falling when the US Dollar or Chinese Yuan falls) and gold enhances it (by increasing in value when USD and equities drop).

The Swiss Franc is a safe haven asset by virtue of the Swiss government’s stability and strong financial system, while gold is a safe haven because of its fundamentals, including its scarcity.

Can Bitcoin be considered a safe haven asset?

Bitcoin’s case is a curious one when compared to other safe-haven assets. One of the key reasons why Bitcoin even merits consideration is its detachment from traditional markets and currencies by the very fact that it was designed by Satoshi Nakamoto as an alternative.

We highlighted this in one of our earlier pieces, with a cursory discussion surrounding the lack of correlation between Bitcoin and Nasdaq. More recently, when US stocks fell this week due to fears of a looming recession amidst a global economic meltdown, Bitcoin rose from under $11,000 to over $12,000 twice before minor corrections.

This surge, which is being attributed to Bitcoin’s status as a safe haven, is somewhat connected to the political and financial tension between the United States and China – two of the biggest economies. With the Yuan falling against the U.S. Dollar, it would make sense for Chinese miners (who comprise ⅔ of all Bitcoin mining in the world) to hold onto their Bitcoins and brace for adverse economic conditions. This reduction in supply is expected to result in a price increase.

However, Bitcoin is notoriously volatile and is among the least stable asset classes of all, making it a weak store of value, if one at all. That being said, some of the fundamentals Bitcoin shares with gold, including scarcity due to limited supply and rarity, make it an interesting hybrid, one which is largely free from government control, is resistant to confiscation and is among the easiest to transfer globally (qualities gold lacks).

In light of this, we believe Bitcoin should be considered an alternative investment as opposed to a true safe-haven asset, given that it is hardly reliable as a store of value. However, its unique characteristics make it a good investment choice in times when trust in the existing financial system and economy is weakened by falling markets, trade wars, and general economic turmoil.

The next question would be how much to invest in Bitcoin or crypto, and our article on crypto portfolio allocation answers this in detail.


As of the publication date of this report, BitBull Capital Management LLC and its affiliates (collectively “BitBull”), others that contributed research to this report and others that we have shared our research with (collectively, the “Investors”) may have long or short positions in and may own options on the token of the project covered herein and stand to realize gains in the event that the price of the token increases or decreases. Following publication of the report, the Investors may transact in the tokens of the project covered herein. All content in this report represent the opinions of BitBull. BitBull has obtained all information herein from sources they believe to be accurate and reliable. However, such information is presented “as is,” without warranty of any kind – whether express or implied.

This document is for informational purposes only and is not intended as an official confirmation of any transaction. All market prices, data and other information are not warranted as to completeness or accuracy, are based upon selected public market data, and reflect prevailing conditions and BitBull’s views as of this date, all of which are accordingly subject to change without notice. BitBull has no obligation to continue offering reports regarding the project. Reports are prepared as of the date(s) indicated and may become unreliable because of subsequent market or economic circumstances.

Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal. This report’s estimated fundamental value only represents a best efforts estimate of the potential fundamental valuation of a specific token, and is not expressed as, or implied as, assessments of the quality of a token, a summary of past performance, or an actionable investment strategy for an investor.

This document does not in any way constitute an offer or solicitation of an offer to buy or sell any investment or token discussed herein.

The information contained in this document may include, or incorporate by reference, forward-looking statements, which would include any statements that are not statements of historical fact. These forward-looking statements may turn out to be wrong and can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors, most of which are beyond BitBull’s control. Investors should conduct independent due diligence, with assistance from professional financial, legal and tax experts, on all tokens discussed in this document and develop a stand-alone judgment of the relevant markets prior to making any investment decision.