The idea of bitcoin serving as a safe haven, or a hedge against financial turmoil, is one people have speculated about for years. Until 2020 however, it was an idea that hadn’t really been tested. Then came the coronavirus and ensuing financial collapses — which, while financially devastating for most of the world, gave us our first chance to see how bitcoin would react in a genuine, widespread crisis.

The basic idea is a simple one, and something we covered in our recent look at how bitcoin might react to a digital dollar. Essentially, it’s that in times of uncertainty, people might look to cryptocurrency as a hedge against market collapse, much like they have looked to gold in the past. These are assets that aren’t dependent on market strength the way stocks are, and which aren’t anchored by currencies or companies that can be weakened in market downturns. Thus, it’s a fairly logical expectation that they’ll be more stable when markets fall, and that this will lead to investor interest that in turn leads to gains.

But this brings us to the key question: Has it actually happened? That is, has bitcoin performed as a hedge or a safe haven these last few months?

In the very beginning, people were fairly quick to suggest that bitcoin would not in fact fill this role. In March, for instance, when the extent of the crisis was still being realised in the western world, major publications were writing that bitcoin wasn’t a safe haven after all, and that it was performing (which at the time meant tanking) just like other financial assets. This was a fair, if short-sighted point; in the beginning of the crisis, bitcoin and other cryptocurrencies dropped off significantly, just like the stock markets and really most tradable assets in the world.

If this was a fair early assessment though, then it’s also only right to point out that bitcoin didn’t stay down. In fact, BTC’s price growth since March shows a fairly strong few months. There have been some sudden dips and quick jolts forward, as has always been typical of bitcoin (and really, cryptocurrency overall). The big picture, though, shows a hasty recovery for the leading cryptocurrency. As of this time, BTC is worth roughly $9,614; on March 15, it was worth about $5,019. So, while bitcoin may not have been a haven during the worst of the crash, it has been safer since than many other assets.

That doesn’t necessarily mean that bitcoin has been proven as a safe haven either, however. While it’s true that it has performed well since March, its recovery was outpaced by gold, and it’s been suggested that BTC is actually being treaded more like an inflation hedge. That is to say, gold is the safe haven — the asset people are buying up because they trust it more than just about anything else right now. BTC, on the other hand, is a hedge — an alternative store of wealth to protect against government stimulus-driven inflation.

This conversation isn’t over, either. With world economies still in a fairly early stage of recovery, there will be more to learn about how bitcoin handles a true crisis. For now though, bitcoin looks to have performed well, even if the specific safe haven question remains open.

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