The one thought running through investors’ minds today is how to keep their money safe without seeing a drastic drop in value. The Covid-19 pandemic that surfaced early this year shows no sign of abating, particularly in the USA, and in many states, there has been a surge instead of slowing down. The effect on the economies around the world has been crushing, to say the least, with the lockdown keeping most industries and other sectors shut for months.
Surprisingly, the economic situation and the state of the financial markets do not match, and while Wall Street is not exactly bullish, it is not down in the dumps either. Trillions of dollars have been injected into the system to keep the monetary and financial markets afloat. But this is an artificial state only, and the real situation is not so comfortable.
In these trying times, the true worth and the safe-haven status of an asset can be understood. Most people consider Bitcoin to be a safe-haven as an investment option during an economic crisis or recession.
What is a Safe Haven?
The benchmark to consider a safe-haven status is the definition offered by Investopedia. An investment is a safe-haven if it has a stable value or even sees an increase during troubling times. Hence investors seek a safe-haven to keep their investments insulated from losses when there is a market fall or downturn. Since the value of a safe-haven asset does not decrease during an economic crisis, investors can put their money here and reduce their losses by limiting their exposure to assets heavily impacted by economic downturns.
Gold, Defensive Stocks, and Treasury Bills have traditionally been safe-haven investments, and if recent trends are anything to go by, Bitcoins may be added to the list.
Is Bitcoin a Safe Haven Investment
Most studies in this regard have focused on a single cryptocurrency, Bitcoin. While cryptos are traditionally more volatile than the usual safe-haven assets like gold or cash, investors get high returns and reduce the minimum overall risk by including Bitcoins as a major part of their diversified portfolios. Hence, Bitcoins are considered to be a safe-haven investment.
Bitcoins have acted as a buffer for investors against dropping oil price movements, the value of national currencies, commodities, and gold. However, even though considered a safe-haven, investors should also exercise some restraint as Bitcoins face several issues like cyber-criminality, pricing bubbles, and regulatory disorientation.
Studies have also brought out a certain degree of strengths of safe-haven investments. In different comparative research papers of safe-haven investment properties, it is seen that Bitcoin is stronger and more robust when compared to gold, commodities, or stock markets. The studies are based on a cross-quantilogram method for determining weak and strong safe-haven investments.
Bitcoin Confirms Safe Haven Status During Covid-19 Pandemic
To further confirm the status of Bitcoin as a safe-haven investment in a crisis, an analysis may be made of its price movements during the Covid-19 pandemic.
On January 1, 2020, the average price of Bitcoin was about $7,200. This was the beginning of a price increase as the world lurched from crisis to crisis. Tensions escalated between the United States and Iran, and the first signs of a raging pandemic were beginning to show. As markets started on a downslide, Bitcoins rates rose above $10,000 on February 9, 2020, the first time since June 2019. Investors were reposing their faith in Bitcoin as a safe-haven status. By early March, the price of Bitcoin had stabilized between $8,500 and $9,000.
After the Bitcoin Black Thursday crash on March 12, 2020, when the crypto was trading on some platforms as low as $3,800, the skeptics questioned the safe-haven status of Bitcoin. But they did not realize that even gold had lost 10% of its value at that time.
Bitcoin came back strongly during the most stressed times due to the Covid-19 crisis to close at $6,500 a week after Black Thursday. On April 24, 2020, it rose to $7,500. Today, as the world fights recession, the Bitcoin price is $27,070. Bitcoin has once again proved its worth as a safe-haven investment during a crisis. You also trade in Bitcoin or invest in Bitcoin through the Bitcoin Code trading platform. This platform is mainly focused on making profit from Bitcoin. To know more further please do check Bitcoin Code Review by industry experts.
Bitcoin may be a highly volatile investment, but when it comes to the crunch, it has always provided investors with a solid investment platform with good returns. There is no doubt that it is one of the best safe-haven investment options.