Episode 234 - Safe Haven Performance in the Age of Bitcoin


Manage episode 259853915 series 2391148
By Brent Philbin, Karim Baruque, and Adam "Roothlus" Levy - The Cryptocurrency news nerds, Brent Philbin, Karim Baruque, and Adam "Roothlus" Levy - The Cryptocurrency news nerds. Discovered by Player FM and our community — copyright is owned by the publisher, not Player FM, and audio is streamed directly from their servers. Hit the Subscribe button to track updates in Player FM, or paste the feed URL into other podcast apps.

Welcome to the Crypto Basic Podcast! This time around we're going over one of the hottest topics of today, given the obvious circumstances: what's the safest way to handle assets during the coronavirus economic crash? What assets provide the most security, and could Bitcoin, as the flagship of the cryptoverse, be one of them? All of the above and more on today's episode. Tune in now!

  • Report in the Economic Bulletin from the Kansa City Fed
  • "In recent years, some have questioned whether Bitcoin could also serve as a safe haven. We compare the behavior of government bonds, gold, and Bitcoin from January 1995 through February 2020"
  • They point out that historically during times of financial stress people tend to shift towards safer assets
  • Safe Haven defined - an asset which is uncorrelated or negatively correlated with riskier assets during times of stress
  • US Gov securities considered "quintessential safe haven against stock market." but they point out some studies have found Gold behaves this way as well
  • "In theory, Bitcoin’s fixed supply and algorithm-based issuance allow it to be independent from traditional markets, which could make it a desirable asset in times of economic stress."
  • They examine 10-year Treasury note & Gold by looking at correlations of daily returns compared to SP 500
  • 1995 to 2020, and they chose this spread to have an equal pre and post bitcoin period
  • Comparison
  • Bunch more charts, essentially showing that
  • 10 year Treasury negative and statistically significant correlation across all stress periods
  • gold has only behaved like a safe haven in certain periods of financial stress
  • Bitcoins correlations with the S&P 500 are not statistically significant in any period and positive in all but one
  • Extra tidbit on current downturn, Bitcoin again has a positive, statistically significant correlation, suggesting it performed like a risk asset in March rather than a safe haven.
  • "Overall, our results suggest that the 10-year Treasury has generally exhibited safe-haven behavior, gold has occasionally exhibited safe-haven behavior, and Bitcoin has never exhibited safe-haven behavior since its introduction"

Note: We are not financial advisors.

249 episodes