Did Crypto Fail the “Safe Haven” Challenge?

By CryptoUser | CryptoPublisher | 8 Jun 2020

When the going gets tough, investors are said to grip to “safe haven” assets like gold, which is supposed to either retain or increase in value amid economic downturns. Avid Bitcoin supporters have contended that BTC in one of these assets, and that it will perform best in a crisis scenario. That’s where Bitcoin gets its “digital gold” nickname.

As you’re aware, the world fell apart this month. Stock markets suffered their worst free-falls in recent history. Hundreds of billions of dollars were wiped off the table in colossal sell-offs as pandemic fears intensified.

Some traders hoped that would bring good news to crypto. It didn’t. On March 12th, Bitcoin suffered its worst one-day plunge in years, falling from $7,600 to $5.3K and failed to rally after bitcoin halving making miners to mine at a loss (At present, break-even cost is around $12,000).

Article: Bitcoin Mining During the Economic Crisis and Post Halving ?

The crypto crash, dubbed Black Thursday, reignited the debate over whether cryptos belong to the “safe haven” asset class, or whether they are otherwise highly-volatile speculative assets like tech stocks.

Everyone has an opinion. Only time will reveal the true answer.

Refer My Article: Bitcoin Price - A Fundamental Analysis !

One point that we should all remember is that during the 2008 global financial crisis, the price of gold initially plunged too. However over the next 18 months, gold rebounded and recovered while stocks continued to decline. (The price of gold also fell this month.)

We should also remember that crypto is less liquid than other assets, making it more volatile and sensitive to short-term price swings. Also, any speculators who created leveraged-long positions in anticipation of a new bull-run cycle would have been epically liquidated when the price fell, adding fuel to fire, pushing the market down further.

Some believe — including me — that crypto isn’t a magical hedge against any type of crisis. Rather, crypto is a hedge against fiat currency. Inflationary environments will be the real test for the “safe haven” argument.

Thank You.

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