Jill Carlson, a CoinDesk columnist, is co-founder of the Open Money Initiative, a non-profit research organization working to guarantee the right to a free and open financial system. She is also an investor in early stage startups with Slow Ventures.

People think I got into bitcoin (BTC) because I have a high risk tolerance.

Actually, I got in because I have a low risk tolerance for worst-case scenarios.

Bitcoin is often touted as a risky bet. It is nascent. It has only been around for about a decade. It is poorly understood by mass markets. It is an experiment. It could still fail. All of these claims are true. In many ways, the risk profile of bitcoin resembles that of an early stage startup. Bitcoin appears to be hovering between the trough of disillusionment and the slope of enlightenment. This means that most people continue to view cryptocurrency as kind of crazy. It’s a gamble.

These dynamics mean that investors often bucket bitcoin as a risk asset. It gets put in the same category as high-growth stocks, high-yield debt, high-beta exchange-traded funds, venture capital investments and emerging markets.

Markets broadly have two modes: risk-on and risk-off. In risk-on scenarios, when markets are confident and things are moving higher, risk assets tend to outperform safe havens. When the markets are risk-off, safe-haven assets like gold, treasury bonds and cash fare better, and are often the only investments trading higher as investors sell out of their riskier positions.

Whether a financial product is a risk asset or a safe haven depends on a number of properties. In some cases it depends on the fundamentals of the asset. Share price is a reflection of the projected future cash flows of the business, which in turn depend on dynamics like customer demand. The dynamics can make companies more or less subject to movements of the markets. In other cases, the categorization of a given asset might depend on supply and demand dynamics. Gold, with its relatively fixed supply and consistent demand from entities like central banks, is resilient to market cycles and downward shocks. In all cases, however, I would argue that what matters most in understanding asset correlations and behavior is market perception. Do traders and investors view the asset as a good place to hunker down in volatile markets? Or do market participants view the investment as vulnerable to the downside, but also prime to participate in boom cycles?

The markets certainly still seem to view bitcoin as the latter. And as far as the price of bitcoin is concerned, and as far as any market correlations are concerned, that perception is all that matters.

This perception misses bitcoin’s most important properties. Bitcoin is, in many ways, the ultimate safe haven asset. It can be self-custodied, so even when systems of trust and rule of law breaks down, it can be held. It is open and borderless, with relatively liquid markets in every country in the world. It is censorship-resistant, meaning no government nor institution can, practically speaking, prevent investment or transaction in bitcoin. Bitcoin has a fixed supply, much like gold. Bitcoin is digital, which makes it practical to hoard, hold and transport. For doomsday preppers, dystopian sci-fi fans and apocalypse predictors, there is a lot to like about bitcoin. 

Yet, if we look at the behavior of the bitcoin price over the last couple of weeks, as concerns over a global pandemic have ramped up, it is clear that bitcoin continues to behave more like a high-risk investment than like the safe haven which it promises to be.

Do the markets have it wrong? Should bitcoin be more correlated with gold than with Apple stock? Maybe. But as John Maynard Keynes put it, “The markets can stay irrational longer than you can stay solvent.” The road to having bitcoin understood and viewed as a safe haven is a long one, demanding deep investment in education. What matters is the narrative around the asset, and right now the narrative around bitcoin is that it is an early-stage, high-risk bet. As far as the markets are concerned, that perception is reality.