Has Bitcoin Become a Safe-Haven Asset?

Key Insights

• Bitcoin failed to gain additional upside momentum despite optimism in the equity markets. 
• The price of energy and the fate of Russian Bitcoin miners are key catalysts to watch in the upcoming weeks. 
• Expect strong volatility as traders try to evaluate multiple factors that change daily. 

Bitcoin surprised traders yesterday after it moved lower when S&P 500 gained 2%, highlighting the strong demand for riskier assets. Has Bitcoin started to serve as a safe-haven asset?

A Sudden Turn?

A week ago, traders rushed out of cryptocurrencies amid a global move out of riskier assets. However, sanctions on Russia’s Central Bank and the imposition of capital control measures in Russia highlighted the use case for crypto, and the crypto markets rebounded.

At first, BTC and other main cryptocurrencies like ETH or XRP behaved like traditional riskier assets. When demand for safe-haven assets like the U.S. dollar or gold increased, cryptocurrencies were under pressure.

However, this pattern changed yesterday, when Bitcoin declined amid strong demand for riskier assets. Today, Bitcoin is moving lower while S&P 500 futures are mostly flat in premarket trading.

Energy Prices and Sanctions on Russia Will Have a Material Impact on Bitcoin Mining

The energy-intensive Bitcoin mining will surely feel the impact of the recent moves in energy markets and may find itself under significant pressure in case Western countries impose sanctions on the Russian energy sector.

The key problem for Bitcoin miners in Russia is the tech blockade, which will likely force them to leave. Together with the recent events in Kazakhstan, it will force Bitcoin miners to concentrate in the U.S., where their fate will depend on regulatory action.

At this point, many factors impact the price of Bitcoin and other leading cryptocurrencies, and the current situation cannot be limited to a simple safe-haven asset vs. riskier asset paradigm. In this light, traders should be prepared for strong moves in the upcoming days.