Is Bitcoin Really No Longer A Safe Haven Asset?

The bitcoin price is under pressure once again as geopolitical tensions begin to flare up once again. There was a time when investors and traders used to look at bitcoin from a different perspective, and that perspective for them was that bitcoin is an alternative asset, and it is a kind of alternative asset that provides safety for traders in times of high uncertainty. After the Crypto King has been dubbed and known as digital gold, but the fact that it has failed investors several times as a sage haven asset class, the question for traders is whether they should begin to look at this asset class from a different perspective.

Price Performance

This year, bitcoin prices have seen a decent rally; we saw a new high for the cyrpto king, but then we also saw some serious correction that took the price well away from its all time high. To put things into perspective, the price of the crypto is up over 51% year-to-date (YTD), and on a year-over-year scale, the price is up over 132%. These jaw-dropping gains are not just eye candy; in fact, the price of bitcoin has made serious gains in September, rising over 9.94%—despite peaking above 12% just a few days ago. The three-month performance of the shining metal sits at a robust 2.84%.

Safe Haven

Bitcoin price has always been considered as digital gold, but in the last few occasions it has terribly acted as a safe haven asset. When the war broke out between Russia and Ukraine, the bitcoin price fell dramatically on the back of the incident. It was like that investors were selling it first and asking the questions later.

When conflict in the Middle East began to esclate due to the Israil and Gaza wars, the bitcoin price experienced a sharp decline directly— that was the immediate effect of the news on the bitcoin price.

The third time when the price plunged was when Iran did its retaliatory attack on Iran, and traders became extremely nervous. The news only brought sell off for the Bitcoin price. And now that that situation has escalated to its highest level after the attacks that happened last night, the bitcoin price is once again moving to the downside.

Although it is true that the price did experience in the after math of all above situations—excluding the current one, which is still very much in play as we don't know how large and how intense the attack is going to be on Iranian land.

It will not be wrong to say that if one is looking to trade bitcoin on the back of the escalation of geopolitical tensions, bitcoin is certainly not your safe haven asset. In fact, bitcoin has very much acted as a risky asset, and just like the rest of the financial markets, it experiences adverse price action as well.

If Bitcoin Is Not Safe Haven, What Is Safe Haven Then?

Looking seriously from the lens of geopolitics and the situation that we are in today, bitcoin is far from being classified as a safe haven asset. Your ultimate safe haven is your dollar index, as on all of these occasions we saw strength coming in for the greenback. When geopolitical tensions rise, investors typically flock to traditional safe haven assets such as gold, the Japanese yen, and US Treasury bonds. These assets have historically proven to be more stable and reliable during times of uncertainty compared to volatile cryptocurrencies like bitcoin. While bitcoin may offer potential for high returns, it also carries a higher level of risk. Therefore, it is important for investors to diversify their portfolios with a mix of safe haven assets to mitigate risk and protect their wealth during turbulent times.

Is There An Opportunity To Bag a Bargain in The Current Sell Off?

As mentioned before, in pretty much all situations, the bitcoin price did experience some serious recovery, just like other risky assets such as stocks. So to answer the question that if there is an opportunity to bag a bargain in the current sell off, the answer is likely yes.

The bitcoin price has been trending in a range, which means the price has visited specific levels in terms of a heightened sell off that occurred on the back of geopolitical tensions or a lack of interest in bitcoin demand. On the other side of the coin, the price has moved sharply higher from these levels when risk on trade comes into play and traders have rushed for bargain hunting opportunities. So it is safe to say that when the price drops below 60K and begins to move towards the 57K price level, we do see bargain hunters coming into the market. However, the serious opportunity to play it comes when the price begins to trade below the 50K price.

At this point, investors who believe in the long-term potential of Bitcoin may see this as a prime buying opportunity. The price dropping below $50,000 could be seen as a significant discount, especially if they believe that the price will eventually surpass previous all-time highs. This could lead to a surge in buying activity as investors look to capitalise on the lower prices and potential for future gains. Additionally, institutional investors may also see this as an attractive entry point, further fuelling the demand for Bitcoin at these levels.

Bitcoin Chart: HowToTrade.com

The Bottom Line

The bottom line now is that traders start thinking of changing their perspective when it comes to safe haven assets. It has been proven and seen several times that the asset class certainly provides little to no hedge if an investor is looking to park their asset in place, which can shield them from the sell off. However, the increase in geopolitical tensions does present an opportunity for traders to participate in an opportunity where they bag some serious bargain.