In brief

  • A UBS report has concluded that Bitcoin is likely not an attractive safe-haven asset.
  • The cryptocurrency's volatility and vulnerability to price swings were cited as unattractive to most investors.
  • Survivorship bias and limited diversification also hold the crypto asset back.

Banking giant UBS is skeptical that Bitcoin is a safe-haven asset, according to a report issued on September 9 by its Swiss division.

A safe-haven asset is a financial instrument that is expected to retain or grow in value during periods of economic decline. They exist independently of the wider economy, which means they can resist market crashes and provide investors with profit when other traditional assets fail or depreciate over time. While the demand for safe-haven assets is growing, the UBS report suggests Bitcoin is not one of them. 

“Given their high volatility and the size of the past drawdowns, cryptocurrencies might be attractive to speculative investors, but they are neither a suitable alternative to safe-haven assets, nor do they necessarily contribute to portfolio diversification,” the report stated.


Fast forward to 2020, the Covid-19 crisis has caused havoc on financial markets. According to the report, the start of the crisis saw Bitcoin positively correlate with traditional assets because of an unprecedented increase in liquidity needs. However, since then, some correlations have reverted, casting doubt on Bitcoin’s safe-haven suitability. 

A not-so-safe haven

The report provides four distinct reasons why Bitcoin might not be a safe-haven asset. 

First, the famed crypto asset is not suitable for standard risk profiles because price swings present too high a risk for most investors. “Trading-oriented investors might find appeal in such price swings, but our analysis shows that getting the timing wrong can result in destruction of capital,” the report said. 

Survivorship bias also has a role to play. According to the report, investors often focus on successful cryptocurrencies as opposed to unsuccessful ones. As a result, outlook is skewed. “Differentiating between the winners and the losers requires a good understanding of the demand and supply drivers of any given cryptocurrency,” according to the report. 

A lack of dividend and coupon payments is a third reason. The timing of crypto investments is important, given the lack of regular interest or dividend payments in the industry. “Risk assets commonly experience large drawdowns, and without regular cash flows this can more easily result in a permanent loss of wealth,” the report said. 


Lastly, Bitcoin offers limited diversification benefits. The report’s assessments noted improved returns in a portfolio due to low correlation to other asset classes, but more recently, “correlations have increased and returns declined, suggesting Bitcoin may now be less suitable as a portfolio diversifier,” the report said. 

But while banks say this, companies like MicroStrategy are saying otherwise.

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