Is bitcoin a safe haven for investors during a war?
Bitcoin’s recent price jump after the U.S. killing of a top Iranian general has rekindled a long-running debate among investors: whether it will work as a safe-haven asset like gold in times of heightened geopolitical and economic turmoil. The cryptocurrency changed hands around $7,500 on Monday, up about 10 percent since Iran’s top general, Qassem Soleimani, was killed in a lethal drone strike authorized by U.S. President Donald Trump. U.S. stocks fell on the news as investors worried the conflict between the two nations might escalate into a prolonged and damaging war.
For some market analysts and investors, bitcoin’s rally served to underscore the digital asset’s perceived value as a hedge against inflation, historically an economic consequence of major wars. Oil prices jumped in the aftermath of the killing, given Iran’s status as one of the world’s major producers, potentially a harbinger of higher gasoline costs at the pump for U.S. consumers.“Acts of violence and war can create inflation and have demonstrated that in the past,” said Greg Cipolaro, co-founder of Digital Asset Research, which analyzes crypto markets. So heightened violence now could portend higher demand for bitcoin, he said, adding a major caveat: “To the extent that bitcoin is a hedge against inflation.”In traditional investing, a safe haven asset is one where the price typically rises when traders are fearful of increasing risk, or in the face of convulsing stock markets; money is pulled from riskier assets and shifted into “safer” like gold or U.S. Treasuries, expected to be a more reliable store of value.
One theory among bitcoin investors is that while the cryptocurrency lacks gold’s luster or long track record as a store of value, it shares the key property of being difficult to mine; the supply of new bitcoin is strictly regulated by its 11-year-old original programming code. What’s more, some bitcoin advocates note the private data addresses, or “keys,” needed to spend the cryptocurrency would theoretically be far more portable than gold bars in a tumultuous, war-torn or even simply hyperinflation-racked world. But even among fully committed crypto traders, it remains an open debate as to whether bitcoin actually trades like a safe-haven asset.