BTC as a Safe Haven Asset: Not Yet, But Not Too Far Away
As the season approaches summer — for the North Hemisphere at least — we crypto voyagers also seem to be sailing with an increasingly warmer current in the crypto ocean.
Starting in late April, especially when the Bitcoin price topped US$8300, which is very close to the 12-month high recorded last August, I have been repeatedly asked questions like:
Are we heading to a bullish market soon?
Is now good timing to open a position?
How strong is the upward momentum?
Be very careful answering these questions, especially when the inquirers are your family and friends — and I say that even though I am on the optimistic side in general.
Indeed, I see a firm sentiment of elation, but I am definitely no Pollyanna, who now worships BTC as a safe haven investment against the recent financial market fluctuations and potential risk of severe consequences triggered by the Sino-US trade tension.
As of the time I wrote this article, 15:00 CST on May 23 when the market closed, redness spread across the major Asian stock indices — Shanghai, Shenzhen, Hang Seng, Nikkei, KOSPI, TAIEX — as well as BTC.
Therefore:
Is Bitcoin’s price likely to further increase as its mining block reward halving approaches? Quite likely.
Is the crypto market as a whole to be shored up accordingly and further expand? Very likely.
Is the blockchain world going to attract more dry powder, more talents, and more resources? Absolutely, yes.
Is BTC a risk-against asset class? Not yet — as shown in the following example quite straightforwardly:
Gold as a hard currency, so far, has been doing pretty well in keeping or even increasing its value against market turbulence, making its name as a top safe haven asset widely known.
According to World Gold Council’s data, the daily gold volume settled in London market over the counter stands between US$101.6 billion and US$ 234.2 billion, while the 24-hour BTC trading volume is about US$25 billion. Impressive, but still plenty of room to improve.
On top of gold, greenback and yen are also categorized as safe haven currencies.
But why? Gold may have actual value in industrial use in the physical world that secures its underlying worth, while the US dollar and Japanese yen are technically either paper or just numbers.
In my way of thinking, the answer is consensus, which is the differentiated edge of USD and JPY over BTC. I dare say that, as a payment method, the two fiat currencies can be used invariably from around the globe — a level of validity any cryptocurrency could hardly catch up to any time soon.
But wait, isn’t consensus the cornerstone principle of blockchain technology?
Exactly. And the better news is that blockchain consensus is conceived in a way that makes more sense, assuming the information technology evolution accelerates, which is obviously meant to be.
The consensus represented by fiat currency is established upon the consensus of certain sovereignty, which is actually governed by the so-called elites. These elites are a minority of a country’s population who, in many cases, would make no hesitation jeopardizing public good to protect their own interest by all means — including but not limited to printing money.
On the other hand, cryptocurrency consensus is fully decentralized, while the commitment of non-additional issuance is mostly made up front and secured by technical means like through smart contracts.
A financial world with no yielding to power, no yielding to fear, enjoying greater fairness -who wouldn’t dream of that?!
Sorry if I sound a bit radical.
My point is, the thousand-year consensus in the value of gold, diamond and paper money is not unbreakable. If not a full-on collapse, there must be weak points from where the cryptocurrency ideology of decentralization and de-authorization could infiltrate.
That’s when the sunlight floods the crypto world and BTC makes its name on the list of safe haven assets.
It might not be that far off, as it’s now daybreak.
