In the shadow of today's economic crisis, people's choice of safe-haven assets has become particularly important. In this era of uncertainty, the U.S. dollar and Bitcoin have attracted much attention as potential safe-haven assets. Is the traditional U.S. dollar more reliable, or the emerging Bitcoin has more potential? Let’s delve deeper into this issue.

USD: Traditional safe-haven option

The U.S. dollar is often viewed as one of the safest haven assets during times of economic turmoil. As the world's major reserve currency, the U.S. dollar has a solid position and has wide circulation and recognition. When financial market volatility increases, investors tend to move funds into U.S. dollar assets to avoid risks.

Take the current global economic situation as an example. The COVID-19 epidemic has swept across the world, and the economies of many countries have been affected. Investors are full of concerns about market trends. In this context, the U.S. dollar is considered one of the safe-haven assets of choice. Investors tend to hold U.S. dollar cash or U.S. dollar-denominated assets to protect against risks that may arise from market volatility.

Bitcoin: The Rise of a Digital Currency

Compared with the traditional US dollar, Bitcoin, as a digital currency, has also attracted much attention during the economic crisis. As a decentralized cryptocurrency, the value of Bitcoin is not controlled by the government or central bank, and it has a certain degree of independence and risk resistance. In the eyes of some investors, Bitcoin is regarded as the digital gold of the future and may become a new safe-haven asset choice.

In recent years, the violent fluctuations in Bitcoin prices have attracted widespread market attention. Despite Bitcoin's high price volatility, its status as an alternative investment vehicle is gradually gaining recognition. Especially when some economies are tightening and the risk of inflation is increasing, Bitcoin is favored as a safe-haven asset.

Risks and opportunities coexist

Whether it is the US dollar or Bitcoin, as safe-haven assets, there are certain risks and opportunities. Although the U.S. dollar is stable, it is affected by many aspects such as U.S. economic conditions and political factors; as an emerging asset, Bitcoin has greater price volatility and higher investment risks. When choosing safe-haven assets, investors need to carefully weigh various factors and make choices based on personal risk preferences and investment objectives.

Amid the current heightened uncertainty in the global economy, investor demand for safe-haven assets is increasing. The U.S. dollar and Bitcoin are two different types of safe-haven assets, each with their own advantages in the market. Investors should rationally allocate assets based on their own circumstances and risk tolerance to achieve the goal of asset preservation and appreciation.

Conclusion

In an economic crisis, choosing the right safe-haven assets is crucial. Both the traditional U.S. dollar and the emerging Bitcoin have their own advantages and disadvantages. Investors should rationally choose safe-haven assets based on market conditions, personal risk preferences and investment goals to avoid risks and achieve asset appreciation. On the road to future investment, let us act cautiously, seize opportunities and meet challenges. The world of currency is like a vast ocean with turbulent waves. Only by moving forward steadily can we reach the other side of success.

The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
China Line　APP DL	China Line　APP DL	China Line　APP DL	China Line　APP DL

Note: The above exchange logo is the official website registration link, and the text is the APP download link.

For years, people have speculated about the fate of Bitcoin in the next financial crisis. Will Bitcoin become a sought-after safe haven like digital gold? Or will it collapse along with other risky assets such as stocks? No one knows for sure. But if you ask Ray Dalio, CEO of the world's largest hedge fund, "When will the next recession be?" He might say, "There is a 55% probability in the next two years." In macroeconomics, there are two opposing investment sentiments - "risk-on" and "risk-off." During the 2008 financial crisis, investors avoided asset risks by shifting their exposure to stocks and real estate to low-risk investments such as US Treasuries and gold. This is the so-called "risk-off" environment. From 2009 to the present, our risk tolerance is gradually increasing. Investor behavior in the cryptocurrency field also confirms this. Many people believe that Bitcoin is a risk-bearing asset, which means that investors may shift their investment exposure to Bitcoin during high-risk periods, thereby driving up the price of the currency. But the key point is that “risk tolerance” and “risk aversion” are not black and white, but there is a middle ground.

For example, it is generally believed that the US dollar and long-term Treasury bonds are both risk-tolerant investments, but US dollar deposits are less risky than long-term Treasury bonds. Stocks and corporate bonds are risk-averse investments, but stocks are more risky than corporate bonds. The risk attributes of an asset change with the environment it is in and over time. For example, as the US dollar becomes the de facto global reserve currency, its risk is reduced.

As Bitcoin continues to evolve, where exactly is it in the middle of “risk tolerance” and “risk aversion”?

I am increasingly convinced that after nearly 10 years of liquidity growth and constant supply, Bitcoin’s risk is currently between the US dollar and other non-reserve currencies (such as the RMB).

Two things have happened in the past six months or so that I believe have made Bitcoin a safe haven asset. First,

In late 2018, we entered the fourth crypto winter. At the same time, people were increasingly worried that the Federal Reserve was raising interest rates too quickly and the stock market entered a bear market correction range of declines of more than 20%.

During this special period, money began to flow from riskier markets such as stocks into the U.S. dollar, partly because investors can get higher returns from the dollar, and partly because the interest rate hikes may indicate that we are entering the late stage of the economic cycle.

Is it just a coincidence that Bitcoin also plummeted from $6,000 to around $3,000? It's hard to say, but I bet that the interest rate hikes may be a contributing factor. Of course, Bitcoin is still riskier than the U.S. dollar.

The second event is the recent depreciation of the RMB against the U.S. dollar. Currently, the RMB exchange rate is approaching 7:1, which is an important psychological defense for many Chinese.

The recent rise in Bitcoin prices is likely due to Chinese OTC buyers using Bitcoin as a hedge for their assets. From a macro perspective, Bitcoin's liquidity is still very small, and without many buyers, a small number of Chinese "whales" were able to push the market price up by 200% in less than three months.

In addition to the depreciation of the RMB, the recent Sino-US trade war is also important. Many people speculate that the latter is one of the reasons for the recent rise in Bitcoin. But the connection between the trade war and the Bitcoin market is relatively weak. Factors such as the trade war have led to the depreciation of the RMB, but the depreciation of the RMB itself is more likely to have a direct impact on the demand for Bitcoin.

In the above events, we see that the direction of the cryptocurrency market changes as investors switch from "risk aversion" to "risk tolerance". 

During the interest rate hike, investors felt that Bitcoin was too risky for them, so they moved from Bitcoin to the US dollar. 

When the RMB depreciated against the US dollar, investors felt that the RMB was riskier than Bitcoin, so they moved from the RMB to less risky assets such as Bitcoin and the US dollar. 

So what will happen to Bitcoin during the next financial crisis? I suspect that a lot will depend on the nature of the crisis. 

1\. If the crisis is mainly limited to developing countries with non-reserve currencies, this may drive Bitcoin prices higher. 

2\. But if the crisis occurs in developed countries, especially the United States, then two scenarios may occur: 

(1) If people continue to trust the US government and the Federal Reserve, as they have done during all US recessions in the last century, then it is likely that funds will flow from Bitcoin to the US dollar. (2) However, if a rare, catastrophic financial crisis occurs and people completely lose confidence, they are likely to buy the world's most reliable hard assets, such as gold and Bitcoin. In fact, Bitcoin's development history over the past 10 years has been in a long and amazing bull market range. We don't know how Bitcoin will perform in a deep recession. However, this year, we seem to have seen some signs.

It is impossible to make any judgments at the moment, but Bitcoin feels safer now than in the past.