Mar 22, 2020 02:57 AM | Justin Cai

The COVID-19 coronavirus pandemic has sparked widespread fear and financial turmoil. The US stock market experienced its worst crash since 2008, sending chills throughout financial markets around the world.


Bitcoin is often hailed as a stand-in for gold, and gold is traditionally viewed as a safe haven asset during times of crisis. It’s now abundantly clear that Bitcoin has not been much of a safe haven in this crisis. So we took a look at how it compared to other safe haven assets such as gold and 10-year US Treasury bonds. 


In the chart below, we examine between Jan 1 and March 17, and important milestones in between are marked in the graph. 


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In comparison to this same period over the past eight years, Bitcoin has followed an unusual path over the progression of this outbreak. Prior to Feb. 15 worsening levels of outbreak in China seemed to correlate with wider gains for the price of Bitcoin. After Feb. 15, newly confirmed cases in China started to slow down, and the price premium largely reversed itself within two weeks. 


After March 7, the price of Bitcoin actually dropped below its usual course, suggesting that concerns over the epidemic spreading to the US caused a wave of panic selling. 


This is in very sharp contrast to what we saw when the epidemic was spreading in China, which might suggest that Chinese investors viewed Bitcoin as a safe-haven asset, but US investors did not. This is difficult to prove definitively, however. 


We also examined prices for two other traditional safe-haven assets, gold and 10-year US treasury bonds, using more historical years (2002-2019) for comparison. 


For gold, we observed the opposite of what we saw with Bitcoin. During the Chinese epidemic phase, gold did not differ from its past performance prior to Feb .15. Afterward, however, it significantly overperformed. This suggests that different attitudes prevail for gold: US investors, but not Chinese investors, may view it more as a safe haven.


What we do know is that the treasury bond market has most unequivocally demonstrated its safe-haven property throughout the epidemic. The graph shows its yield, which is inverse to its price. Treasury yields started to drop around the time of the first case reported in the US, and kept dropping until March 7, when the epidemic worsened significantly in Europe.


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