Bitcoin and the Current Global Markets Crisis: Indeed a Safe Haven?

Traditional stocks are marking yet another day of steep declines. This comes a few days after US President Donald Trump said that he’ll impose a 10% tariff on an additional $300 billion worth of Chinese goods intended for import to the US. Amid tumbling markets, Bitcoin gained upwards of 28% in a few days, causing many to believe that it can be viewed as a hedge. But can it really?

Traditional Markets Continue to Tumble

As CryptoPotato reported last week, Donald Trump said that he will impose a 10% tariff on an additional $300 billion worth of Chinese goods. This catalyzed yet another wave of tension between the two largest economies in the world, casting traditional stock markets in the red. 

It’s worth remembering that the US previously hit another $250 billion worth of Chinese goods with a 25% tariff. 

A week later, it appears that the markets are still feeling the tension. The NASDAQ is down 3.67% in the last day, while the S&P 500 index is down 2.98%, having declined by 87,31 points. 

Another major index, the Dow Jones Industrial Average (DJIA), is also down 2.9% on the day. 

Amid these market conditions, Bitcoin is currently surging, causing many to believe that it can effectively serve as a hedge against traditional stocks. One such individual is Tim Draper, a popular Bitcoin proponent and venture capitalist.

Nasdaq down 3.4% Dow down 2.9%. Bitcoin up 3.2%. Bitcoin may be a remarkable hedge. #bitcoin

— Tim Draper (@TimDraper) August 6, 2019

Indeed, looking at Bitcoin’s performance, we can clearly see that the cryptocurrency has outperformed pretty much all of the traditional stock indexes substantially. Draper is not the only one to be emphasizing Bitcoin’s use as a hedge. Another popular blockchain investor and Bitcoin analyst, Oliver Isaacs, said: 

The net effect of the trade war between the US and China has led to the sudden interest in bitcoin as a hedge on investments.

What’s the Other Side of the Story?

Of course, there are also those who are making the case that Bitcoin might not be well-suited as a hedge investment against traditional stock markets. 

Among the most common concerns are the lack of regulation, Bitcoin’s high volatility, as well as fears of market manipulation. 

Naturally, it’s challenging to determine whether it’s reasonable to consider Bitcoin a safe haven amid bearish conditions in traditional markets. 

However, looking at the numbers, it sure looks like it. This was noted by Anthony ‘Pomp’ Pompliano, who shared a simple yet definitive statistic:

S&P 500 YTD: 17%
Bitcoin YTD: 184%

Bitcoin performance has 10x’d stocks through the first 7 months of the year 🔥

— Pomp 🌪 (@APompliano) August 3, 2019

Since Pomp’s tweet, Bitcoin has gained even more momentum, and it’s now up more than 280% YTD, making its performance relative to the S&P 500 even more impressive.