Bitcoin Can be a Safe Haven Assets

By Rajat Gaur

“Safe Haven” assets are defined as the investors can theoretically turn to committed to their losses when traditional markets are falling down. In other words, assets that won’t fall down in value even when bonds and stocks drops down.

As stock markets are battered by fears of COVID-19 and the Russia-Saudi oil price war, Bitcoin price has been falling down along with stocks. It has plummeted from highs over $10,000 in mid-February to under $8,000. However, this is the most recent short-term response mean that Bitcoin is not a safe haven asset. 

LongHash is compared on the routine as Bitcoin price data from Coin Metrics close price of the Dow Jones Industrial Average, a stock index measures the prices of 30 large American companies. The Dow Jones Industrial Average is used as a barometer for the broader performance of Western stock markets. To make the comparison as direct as possible. Bitcoin’s weekend prices weren’t included in the analysis because there’s no corresponding DJIA price data for those days. 

The price of Bitcoin and DJIA are pretty correlated. From 2010 to March 2020, the two have a Pearson correlation coefficient of over 0.84, suggesting strong correlation. In other words, the two numbers- the Bitcoin price and the DJIA- pretend to move in tandem. When one escalates, the other falls down.

Though, if we break the data down by year, the pattern is less clear. If we see a strong positive correlation of 0.90. But in other years, the correlation is weaker. The year 2012, 2013, and 2019 display moderate positive correlations around 0.5, indicating that Bitcoin’s movements were a bit more divorced from traditional markets in those years. The year 2011, 2015, and 2018 have correlations close to 0 that there likely wasn’t much connection at all between BTC and the DJIA at those times.