Bitcoin has become the king of safe-haven assets

Author: Anthony J. Pompliano, Founder and CEO of Professional Capital Management

When the world is in turmoil and uncertainty, capital allocators seek safe-haven assets to protect their investment portfolios. These safe-haven assets can help investors withstand storms in the short term and preserve their capital in the long run.

Historically, investors have regarded the US dollar, government bonds, and gold as the best safe-haven assets. Recent data shows that Bitcoin has taken the crown and become the king of safe-haven assets.

A table recently released by Bitcoin financial services company Onramp shows that in the past seven financial market crises, Bitcoin outperformed other assets each time.

Data indicates that since 2020, in every negative financial event, Bitcoin has performed better than the S&P 500 and gold. Whether it’s a global pandemic outbreak, international invasion conflicts, domestic policy adjustments like tariffs, or nationwide banking crises, Bitcoin’s 60-day return has been the highest in each crisis.

This does not mean investors should sell off other assets in their portfolios and put all their funds into Bitcoin — that would be irresponsible. But it does suggest that investors with a zero allocation to Bitcoin are actually harming their own returns.

Buying and holding Bitcoin is a prudent asset allocation strategy.

Bitcoin Archive recently shared a research report from Bitwise, which shows the probability of Bitcoin incurring losses over different holding periods. This crypto asset management firm states: “The longer the holding period, the lower the chance of Bitcoin experiencing a loss.”

The most interesting part of this analysis is: as long as you hold Bitcoin for at least 3 years, the probability of loss drops below 1%. In professional venture capital, a 1% chance is almost equivalent to zero probability.

And the way you buy significantly impacts the final returns. For example, a recently popular video shows an investor who has been consistently buying $10 worth of Bitcoin daily over the past 7 years. The total investment is just over $25k, but the current value of their holdings exceeds $10 million.

If you’re like me, you’d immediately wonder: why didn’t I stick to a daily dollar-cost averaging strategy over the past few years? A smart asset allocation strategy applies to any asset, but if you’re investing in an asset with an annualized compound growth rate close to 70% over 10 years, this strategy can generate extremely significant excess returns.

Institutional investors don’t buy Bitcoin daily, but when they see Bitcoin consistently outperform other safe-haven assets during various financial crises over the years, they will definitely take notice.

The data is already very convincing: Bitcoin is the king of safe-haven assets. Only those who stubbornly cling to their beliefs in the face of new information will continue to deny it.