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Functionally speaking, safe-haven assets refer to tools that can hedge against market turmoil or currency devaluation, most typically for gold.Bitcoin is well known as "digital gold," which is one of the biggest selling points because its fixed total (21 million) is theoretically a better hedge against inflation or market uncertainty than gold.But recently, Bitcoin's performance has not been a safe-haven asset.

Yesterday, as the Russo-Ukraine war began, bitcoin prices plunged, and gold prices soared, once near the $2,000 mark an ounce.The huge divergence echoes recent rate hike expectations, and suggests that bitcoin is much more correlated to stocks such as technology stocks than to safe-haven assets such as gold.

The "Digital Gold" narrative

Bitcoin's support theory, known as "digital gold", is based on its gradual decline in supply and annual inflation.According to Nakamoto's design, the number of block rewards earned by miners helping to run the Bitcoin network is halved every four years.That means that the speed of new Bitcoins in circulation is steadily declining until the block rewards are dug up, and finally 21 million bitcoins will remain forever.

Bitcoin supporters say gold is not limited, there are many unproven reserves, and it can even be mined in asteroids in the future.Compared to gold, its intangible and digital features give it the advantages of being easy to divide, unable to forge, portable, and anti-censorship.

Bitcoin performs as a "safe-haven asset."

Record inflation and geopolitical tensions in Eastern Europe fit the functional narrative of safe haven assets, but Bitcoin does not feature safe haven.As gold prices rose amid market turmoil and bitcoin plummeted, many questioned bitcoin as a gold substitute and a safe-haven asset.Since 2022, bitcoin's role as a safe-haven narrative has weakened further as U. S. inflation reports show record growth.

Why isn't bitcoin going to follow gold?

Short-term volatility remains huge as more overseas investors add Bitcoin to their portfolio, and the psychology surrounding the asset seems to have shifted from a liberal, anti-censorship inflation hedge to short-term speculative games.However, it is worth noting that although the price of bitcoin has plummeted, institutional funds currently hold more than 846,000 bitcoins (the green line), and there is no significant reduction, indicating that the institutional allocation of bitcoin is more inclined to long-term investment.

Since 2022, the correlation of bitcoin with riskier tech stocks and ETF has shown a very high positive correlation, drifting away from the safe-haven asset narrative to hedge against inflation and social turmoil.Thus, as an emerging asset, Bitcoin still has a long way to go, investors have a limited understanding of crypto assets, and regulatory concerns are easy to form a resonance, easy to cause violent market fluctuations.Industry reports estimate that about one-third of cryptocurrency investors know very little about the concept and how cryptocurrencies operate.

In another way, Bitcoin was only born more than a decade ago, and gold has a history of thousands of years, and the gap between the recognition and consensus is still large.In fact, it is very rare for bitcoin to reach the current consensus level in such a short time, and now it needs more time and user precipitation.As a result, bitcoin may not be a safe haven until regulation further clarify the status of crypto assets or widespread mainstream recognition of crypto assets (such as Bitcoin spot ETF).

*The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of SparkDAO. Every investment and trading move involves risk, you should conduct your own research when making a decision.