Posted 1 year ago | by Ben Armstrong
Bitcoin Acts as a Safe Haven Asset as Geopolitical Turmoil Ramps Higher
Bitcoin has risen to nearly $8,000 USD this week after Qassem Soleimani, one of Iran’s (former) top generals, was killed by the US military. Investors have wondered if Bitcoin will work as a safe haven asset like gold in times of heightened geopolitical and economic turmoil, and it seems to be rising along with gold so far.
Greg Cipolaro, co-founder of Digital Asset Research, thinks that heightened violence could portend higher demand for Bitcoin. He added, “To the extent that bitcoin is a hedge against inflation.”
Traditionally when things get rough, investors money shift into safe haven assets like gold or U.S. Treasuries, which are believed to be a more reliable store of value once traders start to worry about increased risk. Some Bitcoin advocates think that using the cryptocurrency would theoretically be far more portable than gold bars in a tumultuous, war-torn geopolitical arena.
Bitcoin as the New Gold
There is speculation that Iranians might try to shift money into Bitcoin to protect their assets from inflation once the country becomes more isolated from the global banking system. Even Iran’s leaders are planning to use cryptocurrency as a way to offset pressure from sanctions.
In December 2019, President Hassan Rouhani made a speech in Malaysia that Muslims need a cryptocurrency to, “save themselves from the domination of the U.S. dollar and the American financial regime.”
Ryan Selkis from data provider Messari argued Bitcoin is a “risk asset” and would be among the first things investors liquidate, “in the event of an uptick in global economic and regulatory uncertainty...That cyclical pain could be exacerbated by further crackdowns on the industry,” according to an email that was sent to his clients last Friday.
No Consensus on Bitcoin as a Safe Haven
Not all cryptocurrency analysts are convinced that Iran is thre reason why Bitcoin is moving higher. UK market analyst for trading platform eToro, Adam Vettese, wrote in an email that while some market observers say the recent rally, “affirms bitcoin’s status as a safe haven,” that may not be the case at all.
According to the Vettese, the recent price action higher might have simply been, “a technical move off support at $7,000.”
According to Vettese, “There’s no way,” the term safe haven applies, “in the same sense as gold...Cryptoassets in general are considered high risk and therefore such a description is a contradiction in itself.”
All that said, it is difficult to ignore the timing of Bitcoins bounce against the tensions in the Gulf region. There is no way to know if further escalation will drive Bitcoin's price higher, but at the moment, it does appear to be acting like a safe haven asset.