Is Bitcoin a safe haven now? Recent data and marketing experts say yes

Bitcoin (BTC 7.14%) has been a hot topic in the financial world for years, with opinions about the cryptocurrency ranging from a “revolutionary new asset class” to a “dangerous speculative bubble”. One thing that most experts can agree on, however, is that volatility has historically made it a less-than-ideal safe haven. But recent market movements seemed to have changed that tune. There are fewer dreary trombones and more sparkling vibraphone grooves in the Bitcoin canticle these days.

But is cryptocurrency really ready to serve as a long-term vault for your hard-earned wealth? Let’s take a closer look at Bitcoin’s suitability for the big role in light of recent data and expert analysis.

What’s up?

Bitcoin has been on a tear since the beginning of 2023, rising 45% since the start of the year. On the other hand S&P 500 (^GSPC 0.87%) the index is up just 0.8% over the same period, and gold is up 2.6%.

If you zoom out to a three-year view, you will find that Bitcoin has once again outperformed the traditional safe havens of gold and broad stock market indices. This time gold is up 19%. The S&P 500’s dividend-adjusted total return stands at 49%. Over the same time period, Bitcoin rose 367% higher.

And if you allow me to go back six years instead, and include the surge from 2017 and the 2018 crypto winter in the data, we can see how a $10,000 investment in Bitcoin has performed against gold and the S&P 500 since the spring of 2017:

Bitcoin price data from YCharts

Of course, past results are not a reliable indicator of future results. Bitcoin is notoriously volatile, and its value can drop as quickly as it has risen. The chart above, as impressive as it is, also shows many dramatic price drops over the years.

But it seems Bitcoin has finally established itself as a contender in the safe-haven asset category. As investors seek alternatives to traditional stores of value, such as precious metals or various stock market indices, Bitcoin’s unique characteristics and limited supply can make it an attractive option for those looking to protect their wealth from inflation and currency fluctuations.

And it is completely in line with the original intentions of Satoshi Nakamoto, Bitcoin’s unknown inventor (or group of inventors). The cryptocurrency was designed to resist inflation through a lifetime of a maximum of 21 million digital coins, of which 19.3 million have already been minted. This limited long-term supply is similar to the limited amount of gold on the planet, which is why Bitcoin bulls often refer to it as “digital gold.”

Expert analysis

Despite the volatility, some market experts believe that Bitcoin can continue to serve as a safe haven in the future. Beyond the gold-like supply-and-demand equation, some Bitcoin gurus point to the growing interest of institutional investors and large corporations. As a result, cryptocurrency may become more mainstream and accepted as a legitimate asset class.

In fact, companies like Tesla (TSLA 4.36%) and Block (SQ 5.07%) have even added Bitcoin to their balance sheets, further signaling their confidence in the cryptocurrency. Taking that idea to its next logical step, business software builder Micro strategy (MSTR 5.08%) has converted most of its cash holdings to Bitcoin — and continues to buy more coins funded by a combination of cash flows, loans and stock sales.

deVere Group CEO Nigel Green calls the current banking crisis a “springboard event” for Bitcoin as traditional investors begin to treat the digital asset as a safe haven in the storm. The financial upheaval may inspire others to follow in the footsteps of Tesla, Block and MicroStrategy. Massive long-term inflation of the US dollar is a critical part of this scenario: “Investors are therefore looking for alternative currencies, such as cryptocurrencies,” writes Green in a recent press release. “Going forward, these will increasingly compete with traditional, fiat, and this will help trigger the waning dominance of currently leading international currencies.”

What’s next for Bitcoin holders with “diamond hands”?

No one knows for sure where Bitcoin will go next. The crypto winter could be thawing as we speak, or another cold snap could bring Bitcoin prices down again in 2023.

But I think it’s abundantly clear now that cryptocurrencies are here to stay, and that Bitcoin is likely to be a reliable store of wealth for many years. MicroStrategy Chairman Michael Saylor may be on to something after all. Really committed Bitcoin bulls with diamond hands should see amazing results a few years down the line.

That said, I still don’t want to convert my entire net worth to Bitcoin and take out loans to buy more. Leave it to the professional risk takers for now. Instead, I’m happy with a modest Bitcoin position that can serve me well in the long run without adding much short-term risk. It’s a good place to park cash you won’t need for at least a year or two, allowing Bitcoin to ride out the speed bumps and challenges on the road to sustained wealth. That’s actually how I think about all investments. Holy patience is arguably the best quality an investor can have. Just ask Warren Buffett or Peter Lynch.