The Bitcoin safe haven myth has been exposed (again)
- Robin Powell
- 1 hour ago
- 8 min read
The Bitcoin safe haven narrative has been pitched to millions of investors as the modern alternative to gold. But every time a real crisis has put it to the test — a pandemic, an inflation shock, a market selloff — it has failed.
Think of it this way. You wouldn't buy an umbrella that only works in a light shower. You'd want one that holds up when the wind is howling and the rain is coming sideways — because that's the whole point of having one.
Bitcoin was sold on exactly that promise. When stocks crash, when currencies stumble, when the world looks uncertain — Bitcoin will keep you dry. Digital gold. Uncorrelated. A safe haven for a volatile age.
In October 2025, Bitcoin hit a record high above $126,000. By early February 2026, it had been nearly cut in half, briefly dipping below $61,000 before recovering to around $68,000. That's a drawdown of roughly 46% in four months.
Over the same period, gold — the asset Bitcoin was supposed to replace — kept hitting record highs.
One asset delivered what was promised. The other collapsed under the weight of its own marketing.
If you bought Bitcoin as portfolio insurance, you're not alone — millions were told it would protect them when markets got ugly. The case sounded bulletproof.
But an umbrella that folds in the wind isn't an umbrella. It's a prop.
The "digital gold" claim doesn't survive contact with reality
The pitch was simple. Bitcoin shares gold's key properties — scarce supply, no central issuer, costly to mine — but it's more portable, more divisible, and capped at 21 million coins. Digital gold for a digital age.
Real gold, meanwhile, has been doing what gold does. It more than doubled from its pre-pandemic price, smashing through $5,000 an ounce for the first time in January 2026. Over 2025, it climbed roughly 60% and set more than 40 record highs. When central banks wanted to diversify away from US Treasuries, they bought gold. When investors wanted a hedge against fiscal deficits and a weakening dollar, they bought gold.
Bitcoin did the opposite.
My co-author Ben Carlson admitted as much in a recent blog post. "I think we can put the digital gold comparisons to bed for now," he wrote. "Everything we were told bitcoin could be has not come to pass." Carlson had genuinely believed Bitcoin could dethrone gold. He was honest enough to say he'd been wrong.
"Everything we were told bitcoin could be has not come to pass." — Ben Carlson
The academic research tells the same story. Campbell Harvey of my alma mater Duke University found that while gold and Bitcoin moved in tight correlation from 2022 to 2024, that relationship broke down early in 2025. His conclusion was blunt: "Labelling bitcoin 'digital gold' is an oversimplification," he wrote in his October 2025 paper Gold and Bitcoin. "It is hardly a safe-haven asset."
There's a deeper problem with the comparison. Gold's credentials as a crisis hedge rest on centuries of evidence across wars, panics, and currency collapses. Bitcoin's entire track record spans roughly 15 years — most of it during a historic bull market in risk assets. We're only now seeing how it behaves when the weather turns.
The inflation hedge that never was
On paper, the case sounds airtight. Bitcoin has a hard cap of 21 million coins. No central bank can print more. No government can debase it. So when currencies lose purchasing power, Bitcoin should hold its value — or rise. It's the kind of logic that fits on a napkin, which is probably why it spread so fast.
The data says otherwise. Research from NYDIG, a Bitcoin-focused financial services firm, examined the relationship between Bitcoin's price and various inflation measures. Greg Cipolaro, NYDIG's global head of research, was direct: "The correlations with inflationary measures are neither consistent nor are they extremely high." Bitcoin doesn't reliably track inflation up or down. The relationship is weak, unstable, and sometimes negative.
The real test came in 2022, when US inflation hit 9.1% in June — the worst reading in 40 years. If there was ever a moment for the inflation hedge thesis to prove itself, this was it. Prices were surging, purchasing power was eroding fast, and investors were desperate for protection.
Bitcoin fell more than 60% that year.
An asset that loses more than half its value while inflation runs at four times the central bank's target isn't hedging anything. It's compounding the damage.
As Larry Swedroe has pointed out, NYDIG concluded that investors should stop treating Bitcoin as inflation protection and recognise it for what the data shows: a barometer of global liquidity, rising when capital flows freely and falling when conditions tighten. So much for the Bitcoin safe haven case on inflation.
"An asset that loses more than half its value while inflation runs at four times the central bank's target isn't hedging anything. It's compounding the damage."
What the academic evidence says about Bitcoin as a safe haven
Researchers have tested Bitcoin's safe-haven claims across COVID-19, the 2022 rate-hiking cycle, geopolitical shocks, and equity selloffs spanning multiple continents. The findings are consistent — and damning.
Conlon and McGee (2020) studied Bitcoin during the March 2020 COVID crash and found it fell in lockstep with the S&P 500. Even a small portfolio allocation substantially increased downside risk — the amount you stand to lose when markets are at their worst. That's the opposite of what a safe haven should do.
When the same team expanded their analysis internationally, the results were worse. Conlon, Corbet, and McGee (2020) examined Bitcoin's behaviour across equity markets worldwide during the pandemic and concluded it failed as a safe haven for the vast majority of indices tested. Including it in a portfolio actively added to losses during the selloff.
The problems aren't limited to crisis behaviour. Smales (2019) argued that Bitcoin's structural characteristics — its extreme volatility, thin liquidity, and high transaction costs — mean it shouldn't even enter the safe-haven conversation, regardless of correlation patterns.
Looking at longer time horizons, Bouri, Shahzad, Roubaud, Kristoufek, and Lucey (2020) used wavelet analysis — a technique that tests how relationships between assets change across different timeframes — to examine Bitcoin's protective properties. They found that any safe-haven characteristics were weak, inconsistent, and heavily dependent on the specific period and market examined.
Shahzad, Bouri, Roubaud, Kristoufek, and Lucey (2019) asked directly whether Bitcoin was a better safe-haven investment than traditional commodities. Their answer: at best, a "weak" safe haven in limited markets and limited conditions.
The pattern across these studies is striking. Different research teams, different methodologies, different time periods, different markets — and the conclusion barely changes. Bitcoin's correlations with risk assets climb when investors most need protection.
In fairness, some studies do find short-term safe-haven properties during mild dips. But these tend to evaporate the moment a genuine crisis hits. When markets fall 5%, Bitcoin might hold up. When they fall 30%, it tends to fall harder.
That distinction matters. Nobody needs a safe haven for small dips. You need one for the moments that threaten your financial plans. And on that measure, the Bitcoin safe haven thesis doesn't just underperform — it backfires.
Why the Bitcoin safe haven myth keeps getting recycled
The narrative persists not because evidence supports it, but because too many people profit from keeping it alive.
Start with mining economics. Bitcoin mining consumes enormous amounts of energy and requires constant investment in specialised hardware that depreciates fast. Industry data suggests average breakeven costs for publicly listed miners run well above $70,000 per coin — and that's before depreciation and non-cash expenses push total production costs higher still.
Harvey has noted that mining costs for both gold and Bitcoin are substantial, but the difference is telling: gold miners sell a commodity with thousands of years of established demand. Bitcoin miners sell tokens whose value depends almost entirely on sentiment. When the price drops towards breakeven, the entire mining industry faces an existential squeeze — and a powerful incentive to keep every bullish narrative circulating, the safe-haven claim included.
Exchanges have their own reasons to amplify the story. Cryptocurrency exchanges make money from trading volume and new sign-ups, both of which surge during hype cycles. "Bitcoin is digital gold" is a recruitment pitch dressed up as financial analysis. It gives hesitant investors a familiar framework, a reason to open an account and start trading. Nobody's exchange revenue benefits from the more accurate framing: "Bitcoin is a speculative asset with no cash flows whose price is driven by liquidity conditions and sentiment."
Then there's the media. Headlines about digital gold generate clicks. Sober analysis of correlation coefficients doesn't. Financial media has learned that Bitcoin controversy drives engagement, and the safe-haven debate is one of the most reliable traffic generators in financial publishing.
And finally, there's confirmation bias — our tendency to notice evidence that supports what we already believe and dismiss what contradicts it. Bitcoin's periodic rallies during minor market wobbles get cited endlessly. Its collapses during genuine crises get explained away as anomalies. The story becomes self-reinforcing, not because the data supports it, but because the people repeating it have money on the line.
None of this makes individual crypto investors foolish. It makes them human. But it should make everyone sceptical when the same claims keep resurfacing despite the weight of evidence against it.
What works when the weather turns
"Has this umbrella ever been tested in actual rain? Because the one marked 'digital gold' has a perfect record of collapsing the moment the weather turns."
Bitcoin's price may well recover. It has before, and it probably will again. Its future as a speculative asset is an open question, and reasonable people can disagree about whether it deserves a place in a portfolio sized for the risk.
But the Bitcoin safe haven claim? That's not an open question. It's been tested — in a pandemic crash, an inflation surge, a rate-hiking cycle, and a geopolitical shock — and it failed every time. The evidence isn't ambiguous. It's overwhelming.
So next time someone tries to sell you storm protection, ask a simple question: has this umbrella ever been tested in actual rain? Because the one marked "digital gold" has a perfect record of collapsing the moment the weather turns.
You don't need a revolutionary asset to build a resilient portfolio. You need evidence. And the evidence points, as it usually does, towards the boring stuff that works.
Resources
Bouri, E., Shahzad, S. J. H., Roubaud, D., Kristoufek, L., & Lucey, B. (2020). Bitcoin, gold, and commodities as safe havens for stocks: New insight through wavelet analysis. The Quarterly Review of Economics and Finance, 77, 156–164.
Cipolaro, G. (2025, October 24). NYDIG weekly research digest. NYDIG. Reported in CoinDesk.
Conlon, T., & McGee, R. (2020). Safe haven or risky hazard? Bitcoin during the Covid-19 bear market. Finance Research Letters, 35, 101607.
Conlon, T., Corbet, S., & McGee, R. J. (2020). Are cryptocurrencies a safe haven for equity markets? An international perspective from the COVID-19 pandemic. Research in International Business and Finance, 54, 101248.
Harvey, C. R. (2025). Gold and Bitcoin. Available at SSRN.
Shahzad, S. J. H., Bouri, E., Roubaud, D., Kristoufek, L., & Lucey, B. (2019). Is Bitcoin a better safe-haven investment than gold and commodities? International Review of Financial Analysis, 63, 322–330.
Smales, L. A. (2019). Bitcoin as a safe haven: Is it even worth considering? Finance Research Letters, 30, 385–393.
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