- Bitcoin achieved the status of safe-haven assets in late 2019, but is bitcoin really living up to its status is a matter of concern.
- Micheal Novogratz, Ex-Goldman Sachs Partner recently tweeted that bitcoin is no more a safe asset, it has become a risk asset.
The world of finance has seen a massive shift in the last ten years. Gone are the days when only traditional commodities like gold have been considered safe-haven assets, bitcoin also joins the rank of safe-haven assets in late 2019.
Bitcoin price as of recently plunged through the key support levels and continues to trade downwards pulling the whole market down with its usual dominance. The price of gold continues to rise which means gold is living up to its safe-haven status, while bitcoin is not really performing which certainly puts a question mark on Bitcoin’s safe-haven status.
Bitcoin- A Safe Haven Asset or Risk Asset
Michael Novogratz, a known name in crypto-verse, shared a tweet on the same topic which sparked a lot of discussion on the twitter thread. The question that he has asked basically means, why is Bitcoin no longer considered a hedge fund and safe-haven asset, but instead a risk asset?
How did $btc go from being a hedge against bad stuff to getting washed out and trading like a risk asset? When things go from bad, to very very bad like they did last week, investors take leverage down as fast as they can. They book profits to make up for other losses. Ouch.
— Michael Novogratz (@novogratz) March 1, 2020
A twitter user replied to Michael’s tweet that this happened for the same reason people had dumped gold because people will do anything to keep liquidity in the market keep it from becoming stagnant. Again the same point, liquidity which also means easy flow that equals flexibility in the market. Gold, on the other hand, is a safe haven asset, which means that it is expected to retain or increase its value in times of turbulence in the market, but it kills flexibility and liquidity.
Same reason gold got dumped hard. People will sell anything to get liquidity in market moves like that. It doesn't mean gold (or btc) is no longer a hedge. It will just take time for the system to adjust to shocks.
— Fizz2 (@The_Fizz2) March 1, 2020
But does Bitcoin have the power to replace Gold as a safe haven asset? Given the fact that in the past couple of weeks, because of the fear of the spread of Coronavirus (COVID-19), the investors have dumped their bitcoins whilst booking comparatively fewer profits but safeguarding their capitals.
Is Bitcoin A Safe haven Asset?
According to analysts, this makes the Bitcoin’s safe haven narrative completely void as the investors are no longer concerned about the possible higher profits. They are concerned that with the constant threat of the global spread of Coronavirus and the insanity that comes with it might destroy their capital invested in Bitcoin.
This analysis by the leading analysts around the globe makes it very clear that the safe-haven asset status given to Bitcoin was false and it can probably never actually become a safe haven asset for investors.