People love to discredit the bitcoin “safe haven” narrative when it sells off on the same day as the stock market nuking.
In reality, bitcoin has zero correlation to the stock market. The narrative can exist even if bitcoin isn’t perfectly negatively correlated to stocks like people think it should be. Some days everything just happens to go down; when it’s bloody across the asset universe, cash is the only true safety net.
From a pure portfolio theory perspective, all you can do as an investor is buy a handful of assets you believe will perform well. The secret principle is correlation of said assets. Lower correlation of your portfolio = higher return per unit of risk. With bitcoin having virtually zero correlation to traditional assets, it is an unmatched addition to any portfolio.
Ray Dalio, billionaire investor and founder of the largest hedge fund in the world, values low correlation in his portfolio so much that he considers it the “The Holy Grail.”
This epiphany is what helped Ray Dalio develop the unrivaled asset allocation strategy that he uses in his investment portfolios today:
"As the Holy Grail chart showed, an equity manager could put a thousand 60 percent-correlated stocks into their portfolios and it wouldn’t provide much more diversification than if they’d picked only five. (...) In other words, we could make a ton more money than the other guys, with a lower risk of being knocked out of the game. (...) The success of this approach taught me a principle that I apply to all parts of my life: Making a handful of good uncorrelated bets that are balanced and leveraged well is the surest way of having a lot of upside without being exposed to unacceptable downside."
The truth is, nobody knows if bitcoin will trade similar to a ‘risk-on’ asset or a safe haven asset during the impending debt-fueled financial crisis. Cash is consistently losing buying power via perpetual quantitative easing and people are starting to realize that stocks are relatively expensive. Smart money is hunting for competitive yields with alternative investments like bitcoin.
For more visit Zima Digital Assets.