Nov 06, · Bitcoin, on the contrary, is just over a decade old. Assets that are now considered safe haven have established themselves as such over . Aug 08, · Bitcoin recently joined the ranks of safe haven assets, according to Chris Reinertsen, Chief Marketing Officer of Rhythm Technologies. Safe haven assets . Oct 11, · A haven is in the eye of the beholder. Bitcoin may be a risk-on asset for venture investors in Silicon Valley, and a risk-off asset for people caught in a currency crisis. Bitcoin adoption in Author: Galen Moore.
Is bitcoin a safe haven assetIs Bitcoin a Safe-Haven Asset? The Narrative Shifts after 8 Months of COVID | Finance Magnates
Equities frequently lose value when investors respond to bad economic news such as, for example, government figures that fall short of market expectations. However, these developments are exactly the kind of information that prompts investors to flock to safe-haven assets. If you are going to use bitcoin to protect your principal, keep in mind that one great way to make this work in the long-term is to create a diversified portfolio.
Bitcoin can help your diversify, making your portfolio less susceptible to wild market swings. Ideally, diversification means that a decline in the value of one component coincides with gains in another, ensuring greater stability. Since bitcoin is in an asset class all its own, its price movements can offset the fluctuations of other securities, potentially helping maintain portfolio stability.
See our guide to diversifying your portfolio using bitcoin. Keep in mind that everyone is different, and your portfolio should reflect your investment goals. If you are willing to take on a high degree of risk in hopes of generating strong returns, for example, you might consider a portfolio that consists heavily of equities.
If you are more interested in conserving your principal, there are many safe-haven assets at your disposal. Gold is a perfect example. While several market observers have compared the innovative digital currency and the precious metal, the two have some very different characteristics. While gold is tangible, it cannot be traded 24 hours a day like bitcoin. Past that, nobody knows for sure exactly how much gold exists. Bitcoin, on the other hand, is limited to 21 million units under the current rules.
Investors have many other safe-haven assets at their disposal. Government bonds, for example, frequently offer investors high safety of principal. Many consider the debt issued by financially stable governments to be a safe investment. However, this debt may provide very modest yields in low interest-rate environments.
Cash is another safe asset whose value will change very little should other securities crash in value. Holding cash, however, does not provide robust returns. Savings accounts yield little, and holding cash can cause you to lose money as your purchasing power deteriorates. By harnessing bitcoin as a safe-haven asset, you can potentially profit from market crashes, protect your principal, and diversify your portfolio. Since the digital currency is in an asset class of its own, it can offer a unique opportunity for diversification.
However, keep in mind that there are many other safe-haven assets available, and most of them have been around longer than bitcoin. As a result, they have far more market history, which can make it easier to predict their price movements going forward. At any rate, practice makes perfect. Any thoughts of bitcoin being a safe haven have been put to bed in the past 10 days and can be found there thrashing in their own clammy sweat, racked by fever-nightmares of The question is, can bitcoin become a safe haven?
We may be about to find out. Born during the last global financial crisis, bitcoin has yet to see one. You can download the paper here. This article will present an up-to-date look at a few of those metrics. Some people you run into may show you a bitcoin chart next to a gold chart and point out similarities in their shape.
Ignore it. A haven is in the eye of the beholder. Bitcoin may be a risk-on asset for venture investors in Silicon Valley, and a risk-off asset for people caught in a currency crisis.
Bitcoin adoption in Venezuela is often cited to indicate the latter. Bitcoin adoption in China may be another measure. Thus, its potential impact on the bitcoin price is greater. This may be a positive indicator for those who hope that a yuan currency crisis could ignite safe-haven demand for bitcoin. Bitcoin is the only crypto asset about which rational people could even discuss a haven narrative.
Other crypto assets may be compelling, but they clearly represent risk-on bets against a vision of future adoption that may take years to prove. There is no decoupling here. Its investors are speculating that it will become a store of value.