Bitcoin (BTC-USD) is not behaving like a “store of value” this week.
The top cryptocurrency is often touted as a good store of value (still its best use case, according to bitcoin believers) and a “safe haven” asset to hedge against economic uncertainty and market volatility.
But this week, as stocks have seen their fastest correction in history, crypto has fallen right along with stocks.
Bitcoin is down more than 10% since Monday morning, below $8,700 and far from its 2020 high of around $10,450 on Feb. 12. Now bitcoin is up only 22% for the year, after it had been up close to 50% just two weeks ago.
Yahoo Finance’s handy cryptocurrency heatmap has shown a mix of blood red and salmon pink in coins all week, reflecting the losses.
Gold, the original “safe haven,” has weathered the stock correction: it’s flat over the past five days, and up 5% in the past month. So, what’s the problem with crypto?
Mati Greenspan of Quantum Economics theorized this week that bitcoin was never “a safe haven against declining profits,” which is the chief concern in the market right now as big companies issue warnings about coronavirus crippling their earnings projections; rather, Greenspan wrote, bitcoin is a safe haven “against inflation, geopolitical strife, and central banks.”
It’s also not quite fair to isolate just the past week to examine bitcoin’s value as an investment class. It’s up 130% in the past 12 months, and up 3,000% in the past five years.
“This is still a very nascent, volatile asset class,” says Frank Chapparo of bitcoin news site The Block. “If I’m an investor and I want predictability in my portfolio, I’m not going to be outsized allocating to bitcoin and other digital assets. Now, that doesn’t mean that this narrative of bitcoin being a hedge against global economic insecurity or political insecurity [is wrong]. That’s still something that could play out over the next ten, fifteen, twenty years.”
The fact that BTC could not rally in the face of the advance by Gold prices and drop in equities was a "tell" pic.twitter.com/GpCiXjB5cD— Peter Brandt (@PeterLBrandt) February 26, 2020
One possible conclusion is that bitcoin is still, at times, a safe haven or flight to safety, but that a global crisis like coronavirus is too hard to overcome; this is a risk-off moment in markets. Or you could conclude bitcoin remains completely uncorrelated to mainstream markets.
As BitGo cofounder Ben Davenport tweeted on Wednesday, bitcoin “is neither a risk-on nor a risk-off asset at this point. It still marches to the best of its own drum.”
But some of the biggest and most prominent bitcoin bulls are still bullish on the “safe haven” theory. Tyler Winklevoss on Wednesday night, as the price of bitcoin was sinking, tweeted: “At some point people will wake up and realize that bitcoin is the best safe haven asset the world has ever seen. Until then, opportunity abounds.”
Daniel Roberts is an editor-at-large at Yahoo Finance and closely covers bitcoin and blockchain. Follow him on Twitter at @readDanwrite.