“Bitcoin is too volatile – it’s craziness.”
“Something so volatile can never be a store of value.”
“Bitcoin is no longer a safe-haven.”
Have you called into question the safe-haven status of Bitcoin recently?
If so, you’re not alone.
And also…you’re wrong.
A big short-term crash in dollar terms doesn’t automatically disqualify Bitcoin as a safe-haven. There are other metrics, too.
Take volatility for example. Historically, Bitcoin has seen extreme volatility. So much so that it has sometimes been viewed as the ultimate risk asset.
But year-to-date, you can’t beat the performance of Bitcoin anywhere else in the market, by any metric imaginable.
Allow me to make the case for this in short order by looking at nominal value, hash rate, and volatility.
1) Value
Even after falling from a recent peak of over $10,000 reached in February this year, Bitcoin has still held up well on a year-to-date basis.
BTC began the year around $7,000, and as of the time of writing, it was in the exact same price range in USD terms.
2) Hash Rate
A higher hash rate makes Bitcoin more secure, as it becomes more difficult to take over the network.
Contrast this with certain Bitcoin imposters, who have very little hashing power and are therefore vulnerable to devastating attacks.
Bitcoin has over 80% of all total cryptocurrency hashing power (I didn’t manage to find a source for this, but Max Keiser recently made this statement on Kitco News). In this light, there’s no other coin that can compete, and none that can say they are anywhere near as secure.
For example, compare the hash rate of Bitcoin (BTC) to that of Ether (ETH), the token of the Ethereum network, which is the second-largest cryptocurrency by market cap. The numbers don’t even come close.
For ETH, the hash rate equals 186 terahash/second (THs) – 186,000,000,000,000
For BTC, the hash rate equals 118 exahash/second (EHs) – 118,000,000,000,000,000,000
In other words, Bitcoin has several orders of magnitude more hashing power than the next largest cryptocurrency network.
3) Volatility
So far in 2020, Bitcoin has been both less volatile than its average and less volatile than financial markets in general (with the exception, of course, of the mid-March crash).
Compared to the unprecedented volatility we’ve witnessed so far this year in stocks, bonds, fiat currencies, and commodities like oil and precious metals, almost all asset classes have proven they can be just as volatile – if not more so – than Bitcoin.
Hard Money is Always a Safe Haven
And finally, Bitcoin remains hard money, and always will, with the 21-million BTC limit being engraved in programmatical stone. This quality alone makes it a safe-haven.
In a time of endless fiat money creation, all hard money ought to be sought out. And history has shown that in the end, hard money always overcomes easy money.
As Saifadean Ammous notes in his excellent book about the economics of sound money, The Bitcoin Standard (and I’m paraphrasing here), “you cannot avoid the consequences of others having harder money than you.”
The reason is that over time, easy money flows into hard money as people notice their purchasing power eroding. At some point, everyone begins seeking out safe havens as life rafts used to flee the destructive currents of unsound money.
This process happens slowly at first and then all at once.
So, by the time most people realize that they need hard money, it’s already too late.
Don’t be one of those people.
Trackbacks/Pingbacks