Whether Bitcoin is a haven asset has always been a controversial issue. However, Bitcoin is among the top safe-haven assets, according to a Bloomberg survey for traditional finance.
Bitcoin among the top three assets if the US defaults
In the event of default, gold is preferred by 51% of investment managers and 45% of the public. Interestingly, the second choice is US Treasury bonds. Although in this scenario the US government defaulted.
Bitcoin safe harbor, May 2023Bitcoin is a much more preferred option, with 7.8% for investment managers and 11.3% for the public. This is traditional finance. As a new asset, a lower percentage share would be expected for Bitcoin. Still, it’s about 25% of gold. The market value of gold is estimated to be around $13 trillion based on the current price of $2,000 and approximately 200,000 tons of gold mined to date.
On the other hand, Bitcoin’s market cap is half a trillion. It could be argued that this should be compared to the entire crypto market cap of $1.1 trillion. But even then, crypto prices would need to more than double to reach 20% of gold.
Is Bitcoin the newest safe haven?
The fact that a 14-year-old currency has beaten the dollar in its safe-haven status is a testament to the power of the code. Especially with it performing even worse in the eyes of the wider public. Admittedly, this will be the case in a situation where the US defaults. If it were really because he couldn’t pay his debt, the dollar would be worthless, as Argentina has shown. Thus, US Treasuries would be priced in cents.
Still, some in the old financial world reflexively prefer government bonds or the dollar. But in a true default, the only options will be two. These are Bitcoin and gold. There will be other less liquid options later on. Art tends to preserve wealth. But through an auction model. The same goes for fine wine or always-needed real estate.
On the other hand, these are not easy to trade. Therefore, they will be very slow to respond to market movements. Bitcoin, on the other hand, is both tradeable and accessible to the global public. Just like gold, although gold is more difficult to access. The most important distinguishing feature of both is that they are outside the banking or national fiat money system.
Objectively it’s not that surprising.
While problems in banking or printing fiat money could break the dollar hours before the US ran out of cash in ATMs in 2008, neither Bitcoin nor gold were affected. Because they have their own units of account and payment systems that have nothing to do with banks or the government. That’s why gold is at the top of the list. Also, as an older generation of millennials, you would expect it because everyone is familiar with gold.
U.S. Treasuries rank second, suggesting that respondents perceive the question more generally, rather than the U.S. defaulting. Assuming that it is, it’s a milestone for Bitcoin to take third place. The percentage level of about 10% also indicates that it has passed the milestone.
However, objectively this shouldn’t be all that surprising. Because the Bitcoin account unit doesn’t care about banks or national governments when it comes to national fiat account. Bonds, like dollars, of course care. All national fiat currencies are based on the same system and framework. Therefore, it is necessary to care about all other fiat currencies as well. Because if the US defaults, the fundamental problem will be in the nature of fiat currency debt-based.
The Yen and Frank or the Pound and Euro would not be a realistic option in the event of an unsustainable debt default. And if there were such a real debt default, Bitcoin’s share would probably be much higher for the US, as Americans are more familiar with crypto than elsewhere. Maybe a 40:60 split with gold out of all values followed by other illiquid assets.
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