Past Fed rate cuts suggest Bitcoin is not a safe haven asset
Bitcoin's performance during the past three interest rate cuts suggests that it is not a safe haven asset, The Block's research shows.
In 2019, the Federal Reserve Board (Fed) cut the interest rate three times, which currently sits at 175 bps. During the three cuts, bitcoin's price did not show any significant pick-up, the research found. On the contrary, its median return across 1-week, 1-month, and 3-month lag were -5.0%, -20.9%, -11.0%, respectively.
A common thesis for Bitcoin as a safe haven asset is that during macro volatility, Fed's action to step in and lower interest rates is a net positive on risk-assets and non-inflationary assets such as gold.
Therefore, as the market anticipates another Fed rate cut, some analyst believes that bitcoin would see a rebound.
However, The Block's analysis suggests that rate cuts are not correlated to the bitcoin price movement. Hence it is not likely to rise during the next rate cut.
Recent macro volatilities precipitated first by the U.S. killing a major Iranian general then the global spread of Coronavirus has triggered a new round of discussion on whether Bitcoin has been accepted by investors as a safe haven asset.
However, similar to the U.S. stock market, bitcoin price has been on a downward trend in the latter half of February due to Coronavirus, currently sitting at around $8550.
