Recently, I’ve been pondering a question: when market volatility intensifies, how should we allocate assets to better hedge risks? This topic is actually more important than many people realize.

Financial markets are never short of risks, but when extreme situations occur and declines surpass expectations, investors often turn to seek safe-haven tools. The scene during the COVID-19 pandemic when U.S. stocks plummeted is still fresh in many minds—at that time, large amounts of capital flooded into relatively stable assets, and safe-haven currencies became the first choice for many.

Speaking of safe-haven currencies, these are currencies that can remain relatively stable and resistant to depreciation during market instability. Currently, the three most recognized are: the US dollar, as the global reserve currency with absolute liquidity advantages; the Swiss franc, due to Switzerland’s perpetual neutrality and stable financial system, with the lowest risk; and the Japanese yen, favored in carry trades because of its low interest rates and strong liquidity.

Besides these three traditional safe-haven currencies, the euro, as the second-largest global reserve currency, is also worth noting—especially against the backdrop of the long-term depreciation of the dollar. Although the Thai baht isn’t as widely recognized, past policy shifts have shown it also exhibits some safe-haven potential.

However, simply holding safe-haven currencies may not be enough. Gold, as the most traditional safe-haven asset, is revalued whenever markets shake due to its physical asset nature and its strong correlation with the dollar. The VIX index (fear index) offers another perspective—when stocks decline and investors panic, the VIX usually surges, and inverse strategies could present opportunities.

Some may ask whether Bitcoin is also a safe-haven asset. Frankly, it currently cannot be classified as such. Its market cap is relatively small, liquidity is far below traditional markets, historical data is limited, and it is heavily influenced by policies—these characteristics make Bitcoin more of a speculative asset rather than a true safe haven.

Safe-haven sentiment is usually triggered by several factors: significant drops in stock indices, surges in the VIX, escalating geopolitical risks, worsening economic data, or black swan events like pandemics and natural disasters. When these situations occur, the market naturally tilts toward safe-haven currencies and instruments.

There are many ways to trade safe-haven assets—direct forex spot trading, hedging through futures and options, purchasing related ETFs, or considering CFDs (contracts for difference). The advantage of CFDs is that they support two-way trading and leverage, allowing profit opportunities whether markets rise or fall—especially useful during economic turbulence. But remember, high returns come with high risks, and leverage trading requires caution.

Ultimately, no single safe-haven currency or tool can remain effective forever. Depending on different market challenges, investors need to adopt a flexible combination—using the dollar for liquidity, gold for value stability, yen for interest rate advantages, and the VIX as a sentiment indicator. Such diversified allocation can truly serve as a safe harbor amid market fluctuations.