Investing is best when people think long-term. You need the patience and discipline to stay with your strategy through the ups and downs. This is the recipe for solid returns over time.
However, even with this mindset, investors are always thinking about where the markets or economy is headed next. Any potential signs of trouble might result in a migration to so-called safe-haven investments. In theory, these assets should maintain or improve their value in weak economic periods.
With the Treasury yield curve having been inverted since late 2022, there are still worries about the potential for a recession in the near term. So where should investors look to park their capital?
As crazy as it might sound, I think Bitcoin (BTC 1.69%) is proving to be the ultimate safe-haven asset. Here's why.
Rising through the chaos
Those who haven't been on their investing journeys long probably haven't experienced greater turbulence than what the U.S. and the rest of the world did in the past four years.
During this volatile period, we saw a global pandemic bring the economy to a screeching halt. Once economies started opening back up and consumer behavior began normalizing, supply chain bottlenecks got a lot of attention.
With strong demand and supply bottlenecks, it makes sense that inflation started to soar in the latter half of 2021 and throughout 2022. At its peak year-over-year change of 9% in June 2022, the consumer price index rose to a level not seen in almost four decades.
To combat this, the Federal Reserve (and other major central banks) started to aggressively hike interest rates at the fastest pace ever. And that brings us to the economic backdrop of today, one characterized by heightened uncertainty.
Throughout these strange four years, Bitcoin, the world's most valuable cryptocurrency, skyrocketed nearly 1,000%. You'd be challenged to find many assets that performed better.
But what about assets that the market generally agrees are safe havens? Gold, which has been viewed as an excellent store of value for thousands of years, has risen by a measly 33%. And U.S. Treasuries, which are considered risk-free assets, declined 12% since March 2020, as measured by the iShares U.S. Treasury Bond ETF. That's a very disappointing trend.
CRYPTO: BTC
Key Data Points
A fresh perspective
When the economy and markets are dealing with disturbances, investors might initially expect gold and U.S. Treasuries to do well. But this clearly hasn't been the case. And I believe it supports the argument that maybe Bitcoin is becoming the ultimate safe haven.
Of course, that doesn't mean it isn't volatile. Quite the opposite. Bitcoin has registered declines of 50% or more several times throughout its history.
However, if we zoom out over a longer time frame, there aren't many assets that have increased the purchasing power of their holders this much. And that's the true goal of investing: to improve your ability to spend more over time.
Bitcoin's monumental rise since the start of the pandemic four years ago demonstrates just how robust it is. It's a fully decentralized monetary network that isn't controlled by anyone and that hasn't been hacked. And because of the design of its software, which is resides on an estimated 18,000 nodes worldwide, there will only ever be 21 million coins in circulation. That absolute scarcity could be driving recently renewed interest in Bitcoin.
Those who understand these qualities won't be surprised if this top digital asset continues its ascent over the next decade and beyond. Perhaps it's time you get on board.
