Crypto enthusiasts rush to promote Bitcoin’s “Safe Haven” status amid banking crisis

Crypto enthusiasts say a “paradigm shift” could strengthen Bitcoin’s status as a safe haven, as the cryptocurrency gains ground after the latest banking crisis.

Following the collapse of Silicon Valley Bank and Signature Bank, as well as the sale of Swiss banking giant Credit Suisse to rival UBS on Sunday, the world’s first and largest cryptocurrency has hit its highest level since June last year.

At the time of writing, Bitcoin was up 17% in the past week according to data from CoinGecko, with a price tag of $28,121.

The rally has been attributed in part to expectations that the US Federal Reserve may slow, if not end outright, rate hikes in response to the banking industry’s problems. This in turn will increase the investor’s risk appetite, which tends to benefit risky assets like crypto.

But some crypto commentators have tried to frame Bitcoin’s ascent as something driven by investors hedging against Danger.

Caitlin Long, founder and CEO of Custodia Bank, said in an appearance at CNBC that the banking crises had “orange-pilled” people, a term for new investors entering Bitcoin, amid what she described as a “paradigm shift” in traditional banking.

“A lot of people are waking up to the instability of the traditional financial system and are getting the orange pill, so to speak, and are looking at Bitcoin for the first time,” she said. “It’s a scarce resource, just like other types of scarce assets that are insurance policies against instability in the financial system.”

Bitcoin’s Time to Shine?

The recent crisis has rekindled hopes that Bitcoin can act as a “safe haven” asset, a type of investment that attracts people who want to protect their wealth from turbulent markets.

Gold, treasury bills and certain currencies can all be seen as safe havens.

ARK Invest’s head of crypto Yassine Elmandrja said yesterday in a newsletter written together with the fund’s founder Cathie Wood that crypto has the potential to offer an alternative to classic banking.

“In the face of US and European banking crises, Bitcoin’s price rise suggests that lax regulatory oversight had no impact on the decentralized, transparent and auditable crypto-asset ecosystem,” he said. “On the contrary, Bitcoin and other cryptoassets act as safe havens.”

CoinShares analyst James Butterfill told Decrypt yesterday that Bitcoin “has not ceased to be a [a safe-haven asset]it’s just that safe haven assets are usually interest rate sensitive, and as the Fed appears to be pulling back from its very aggressive rate hikes, Bitcoin, like gold, is outperforming.”

To see if the characterization holds any water, analysts are keeping an eye on the correlation between Bitcoin and gold, which has historically been used to measure how confident investors are in the safe haven narrative.

Kaiko’s research director Clara Medalie said so Decrypt that both Bitcoin and gold had benefited from the global banking crisis, helping the correlation reach its highest levels since January.

“Gold is up over 7% this month, boosted by safe-haven demand, while Bitcoin is up over 30% since March 12,” they said. “Movement in crypto is mostly driven by changing expectations for the Fed’s monetary policy path, with markets now pricing rate cuts as early as June.”

She added that an increase in long-term Bitcoin holders, or those who have held for longer than a year, also indicates that the leading cryptocurrency may actually serve some investors as a store of value.

The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment or other advice.