In a time where the Federal Reserve is heavily involved in the monetary policy of the US economy, thanks to the ongoing impact of the Coronavirus, it has also come out to state that Bitcoin does not fill the role as a safe haven, or digital gold.

Bitcoin has long held the narrative that it operates like a digital gold. This comes after it moved away from its primary function as an alternative financial system, and grew in value attracting investors, and buyers, as well as traders more than retail spenders.

Bitcoin was also created as an alternative financial system following the 2008 financial collapse in order to give power back to people when the banks decided to implement ongoing and dangerous money tray policies and printing money.

The Federal Reserve has now said it has almost unlimited capacity to print money — bringing in fears of inflation and debasement of the dollar. And so, people have been, according to Coinbase, even using the free money given to them by the government, to buy Bitcoin as an alternative store of value.

Yet, according to the Federal Reserve’s Kansas City branch, it’s way too early to even think about Bitcoin like this. The central bank branch has shredded the sentiment in a recent report.

Risk asset, not safe haven

Bitcoin’s correlation in general has been hard to follow, but for the most part, the belief is that it operates a bit like gold and in anti-correlation to the stock market — which would make it an ideal safe haven asset. However, the Federal Reserve, quoting Bloomberg, has said Bitcoin operates with a positive correlation to the S&P 500 index to a level “significant at the 5% level.”

This is in contrast to 10-year treasury bonds and gold which has operated with a slightly negative correlation to the stock market, showing that Bitcoin has not really reached the status of a safe-haven.

On its way

This data is pretty poignant, and the most recent showing of this was in the middle of March where Bitcoin’s price buckled in correlation to the Covid-19 induced stock market crash. However, this does not mean that Bitcoin will never be a safe haven.

Bitcoin is only just over 10 years old and is a market that is very young and nascent. So, the fact that it is not acting like gold, which is an old and established market, is hardly surprising. But, it also means there is a chance it will act like gold in the future as it continues to mature.