The current crisis has caused major upheavals and shaken the global financial system. People are facing unprecedented global economic and health risks in the markets, and therefore increasingly need to find good safe havens for their investments. Global investors are wondering where the safe havens are to store their assets. They are looking to diversify their portfolios with alternatives to reduce risk in the chaos of COVID-19. Many people now want to diversify a bit by allocating cryptocurrencies, especially bitcoins. But others argue that bitcoins cannot be considered safe havens. Now, what’s the way forward? What is a safe haven?
A safe haven is a financial asset that investors turn to to protect themselves and even make profits in times of market instability. This requires limiting the investor’s exposure to market losses during downturns.
Investments or assets are considered safe havens when they are expected to increase or maintain their value in times of economic turbulence. They are sought after by investors who want to avoid losses and limit their risks when markets plunge. However, not all safe-haven investments are created equal.
Some are known for their good performance in times of economic hardship, while others increase or maintain their price. Therefore, all investors should conduct due diligence research before purchasing such assets in order to assess the risks involved.
The role of an investment in a safe haven is to diversify an investment portfolio and offer protection in times of increased market volatility.
The best protection investments are either negatively correlated or uncorrelated with the general market during periods of economic downturn. In other words, the best safe haven assets increase in value when the rest of the market falls. This demonstrates an increase in investor interest in this asset during depressions and recessions. Cryptocurrency, a new asset for security
Many financial experts believe that investing in Bitcoin is an essential asset for an investment portfolio, as it can provide security during economic recessions. In other words, investing in Bitcoin could be a good investment in times of economic hardship.
Bitcoin is becoming a safe haven, just like gold. The price of Bitcoin has risen rapidly in recent months in the context of the COVID-19 pandemic. Interest in bitcoin has grown further with the recent coronavirus crisis that has crippled stock markets and led to blockages that have caused massive unemployment.
The price of bitcoin collapsed in March 2020, but rebounded to pre-crash levels. Currently, the price has increased significantly. One could call Bitcoin digital gold, as it shares several characteristics that make gold a great store of value. The volatile nature of bitcoin
Despite its sometimes extreme volatility, bitcoin has been the best performing asset of the last ten years. For early investors, this means a 100,000% return on investment in ten years. Compared to other safe-haven investments during the coronavirus pandemic, market data indicates that Bitcoin has evolved differently from other investments and even surpassed them.
It’s clear that with a certain level of confidence that Bitcoin behaves like a safe haven asset, it’s a better investment to hedge against wallet losses in the event of an economic downturn.
The value of Bitcoin has increased enormously, and user interest has increased significantly during the current pandemic, with demand having increased in several countries. Bitcoin’s peer-to-peer trading volume has reached record levels in Venezuela, Morocco, Argentina, and Chile, and additional reports indicate that some crypto exchanges have seen spikes in traffic in recent weeks. Reports show that more and more people are trading cryptocurrencies in general, not just Bitcoins.
The current crisis has created a mass financial panic around the world, which has led many investors and analysts to question whether cryptocurrency can be a safe investment in times of economic crisis. Safe havens retain or increase their value in the event of an economic panic. Bitcoin demonstrates this behavior despite the volatility of its price.