In the face of the slump, it is rethinking the safe-haven nature of bitcoin
Original title: "is bitcoin a safe haven asset?"
Blue fox notes
Much of bitcoin's previous narrative has been labelled as "digital gold", which has generated expectations of a "safe haven asset". The March 12 black swan event did not exhibit any of the characteristics of a safe haven asset. This disappointed many people.
So is bitcoin a safe haven? If so, why didn't bitcoin exhibit risk-aversion in the black swan event of March 12? If not, what is it?
Is bitcoin a safe haven? Since today's bitcoin is certainly not the same as the bitcoin of the future, it would be inappropriate to characterize it entirely.
From the short term, does not have the risk aversion characteristic.
This was demonstrated most vividly by the black swan event, which did not go out of its own way, but fell even more sharply in the face of the general decline in global asset markets. Look at the problem from three aspects:
For one thing, whatever the underlying reasons, the current bitcoin is not yet fully proven to be a safe haven. In the face of the facts, any excuse will seem feeble.
Second, it's not just bitcoin. Gold has also fallen. What is a safe haven asset in the special case of liquidity exhaustion?
The big background of the crash was the global outbreak of COVID 19, the oil price war and other multiple events, which caused the global asset market to fall and triggered the liquidity crisis. Gold also fell during the 2008 financial crisis. Gold is down about 10% on the 3.12 black swan (certainly, much better than bitcoin's more than 40% decline), but that suggests that so-called "safe havens" cannot be safe havens in the event of a liquidity crisis.
Thirdly, if we compare bitcoin to "digital gold", this big drop does not mean that it cannot be "digital gold" in the future.
Bitcoin's market value before the fall was about $160 billion, compared with $8 trillion of gold, more than $70 trillion of the stock market, more than $200 trillion of the housing market, and more than $500 trillion of the derivatives market. This volume is almost a drop in the ocean. What happens in traditional asset markets can be a big deal for the bitcoin market.
Meanwhile, bitcoin can flow around the world 24 hours a day, something no other asset can do. Bitcoin generates a block every 10 minutes or so, and after about six blocks, the transaction is confirmed to be completed, which is about an hour. This convenience may also lead to bitcoin becoming an important liquidity solution in exceptional circumstances.
Bitcoin's current small size, high liquidity and vulnerability prevent it from becoming a "safe haven asset" in exceptional circumstances, even for gold.
If bitcoin has a high enough market value in the future, does it stand a chance of becoming "digital gold"?
In the long run, it might.
Look at bitcoin from a lower level of logic. Bitcoin is essentially a monetary practice, and its monetary policy determines that it follows two completely different paths from the traditional legal currency system.
Because of the natural nature of the credit economy, fiat currency inflation is inevitable in the long run; it is devalued. The diagram below:
In the face of the devaluation of the fiat currency, gold is favored as a "safe haven asset" due to its scarcity. But safe-haven assets do not mean there is no volatility. The price of gold over the past decade peaked at more than $1,900, bottomed at $1,050 and now stands at more than $1,500.
In the long run, gold is a safe haven relative to fiat currencies. Before 1971, an ounce of gold in the United States was worth $35. Today, an ounce is worth more than $1,500. The diagram below:
What would happen if the value of bitcoin were measured in gold ounces?
It can be seen that even compared with gold, the performance of bitcoin assets has been outstanding in the past decade, especially compared with legal currency assets.
From this perspective, it may take a longer time scale, not three days and five days, but three years and five years, to see whether it is a "safe haven".
So will bitcoin become "digital gold" and, in turn, a safe haven asset? It can be seen from several aspects:
1. The history of bitcoin over the past decade proves its vitality.
Bitcoin is created by PoW mining, which inputs computation and outputs tokens. This token is backed up by computation, it's not created out of thin air, and the competition based on computation is essentially the output of energy, so the competition also gives it security. From this point of view, bitcoin essentially has its value base. The price of bitcoin has gone from almost nothing to more than $5,000 today, peaking at nearly $20,000. There have been several big ups and downs, but the overall trend has been upward.
If you look at it not in three days and five days, but in three years and five years, is it a "safe haven" relative to a devalued fiat currency?
2. Bitcoin is a programming rarity.
The scarcity of bitcoins is untamable, and miners' rewards are halved every four years, meaning that inflationary pressure on the currency has halved every four years, to more than 18 million COINS now and a final total of 21 million. This is in sharp contrast to the traditional legal currency market of quantitative easing. With that halving in 2020, new bitcoin increments will fall to an annualized rate of 1.7 percent. Bitcoin's S2F is close to gold. (note: S2F measures the ratio of new supply to total supply.) the world's total gold inventories are about 190,000 tons, with annual new gold production of about 3,260 tons. In other words, it would take 58 years for gold to produce what is currently in stock. After halving in 2020, bitcoin's S2F is also around 58.
In terms of scarcity, bitcoin is basically comparable to gold.
3. Bitcoin has other properties similar to, or even superior to, gold.
Bitcoin ledger can not be tampered with, with low transaction costs, good portability, easy to divide and other characteristics. Bitcoin nodes can independently verify any bitcoin, and game miners protect the bitcoin ledger from tampering. Bitcoin, which can flow around the world, has lower transaction costs, is easier to carry, is easier to divide and has better liquidity than bulky gold.
For other explanations of bitcoin, you can refer to blue fox notes' previous article "chatty hayek, satoshi nakamoto and bitcoin".
conclusion
In the short term, bitcoin is not a safe-haven asset. It's only been around for more than a decade. But in the long run, given its inherent scarcity, portability and imtamability, as well as the gradual migration of humans to the digital world, will "digital gold" be realized by digital native bitcoin? All is not yet known, but it is not impossible that once it becomes "digital gold", it will have the opportunity to become a "safe haven asset" in the future.
Source link:weixin.qq.com
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