Bitcoin Price Drop Stirs Doubts About Its Safe Haven Narrative

Earlier various articles suggested that Bitcoin’s price jumped during the US-Iran tensions and the coronavirus epidemic, but the coin appeared to be displaying a different pattern. Last week Bitcoin’s price dropped from the highs of about $10,500 to as low as under $9,000 raising questions about its safe haven status.

Many commentators have assumed that the collapse in the stock market may be correlated with Bitcoin’s price drop. The chart below posted by Ikigai’s Travis Kling reveals the correlation building between the stock market’s volatility and Bitcoin’s recent fall.

In a recent Block TV interview, Lou Kerner, co-founder of CryptoOracle, was asked whether he considered Bitcoin to be a safe-haven asset, given the recent events. Lou Kerner responded, noting how just because many people see Bitcoin as a safe-haven asset, there is no need for the coin to be 100% correlated in the other direction to where the markets are heading.

Kerner elaborated:

“I think the longterm story for Bitcoin is that it’s a safe haven. And you know, one of the interesting things is in a world where coronavirus has a massive impact, I think it probably has less impact on Bitcoin than almost any other business.”

In addition, Chamath Palihapitiya, chairman of Virgin Galactic and founder of investment company Social Capital, also said in a recent interview with CNBC that Bitcoin’s prices and volumes may not be dependent on various events. He also stated that people who invest in Bitcoin profiting from different outbreaks use an “idiotic strategy.” He added:

“I think a reasonable strategy is to say 1% of my net worth should be in something that is completely uncorrelated to the world and how the world works. You quietly and over some number of time, accumulate a position, and then you just never look at it again[….] it will protect you because then that thing will be hundreds of thousands or million dollars a coin.”

Many other investors and crypto supporters share this viewpoint. People also mentioned Bitcoin as the digital gold, with the precious metal reaching new heights while Bitcoin and other crypto assets fell in prices.

In a letter to investors Quantum Economics founder Mati Greenspan said that Bitcoin could continue to see negative impact of growing health concerts, judging from the current pattern. He stated:

“Is bitcoin a safe-haven or a risk asset? The answer depends entirely on your perspective. If you’re a trader on Wall Street or even a retail speculator, it’s clearly a risk asset. If you’re a citizen of a country whose money is rapidly declining, it’s undoubtedly a safe haven.”

He noted that Bitcoin is not a safe haven when profits decline, but it may secure investors against inflation, geopolitical tensions, and central banks. So far, the stocks don’t seem to have realized any of these threats,” he said.

The “Bitcoin as safe haven” narrative has its critics as well. Peter Schiff, CEO of Euro Pacific Capital, maintains the opinion that Bitcoin can not be described as safe-haven asset after falling more than risk assets during market declines.

In fact, even Anthony Pompliano, co-founder and partner at Morgan Creek Digital, said in a recent interview that Bitcoin is rather a non-correlated than safe-haven asset, which means that Bitcoin’s price highs and dips are not correlated with that of other assets.