The CEO of Binance, Changpeng CZ Zhao, published an article about whether bitcoin is actually a safe haven.
The long article includes a series of answers given by CZ during several interviews on this issue.
First, he says that although bitcoin has not been immune to the losses suffered generically in recent days by all financial markets, he is not at all concerned about the crypto industry, because the fundamentals have not changed.
Bitcoin, in fact, remains a currency with a limited supply and demand is increasing.
He then goes on to suggest a more structured and in-depth analysis of the concept of bitcoin as a “safe haven”, as there are many factors to take into account.
Bitcoin as a lifebuoy
This is where he proposes an analogy to try to understand how bitcoin is behaving these days: BTC is a lifebuoy that helps people float in water and survive in case of a shipwreck. However, if the lifebuoy remains attached to the ship during the sinking, despite the fact that the functioning of the lifebuoy would be the same, it won’t actually be able to help during the shipwreck.
The blog then continues with a question about why in recent days bitcoin appears linked to traditional financial markets: according to CZ this is due to the fact that it is a freely traded asset, whose price is determined by the market, mainly through trading.
At present, the long-standing holders are not particularly active in this market, while investors who have recently acquired bitcoin are panicking more, and selling large quantities. However, once cryptocurrencies are sold and fiat currencies are cashed in, they tend to buy back cryptocurrencies after the price has dropped.
Moreover, many people are currently looking for liquidity, in fiat currencies, to pay for the expenses caused by the emergency, so they are selling everything they have in their wallets to collect fiat money.
Regarding the recent drop in the price of gold, CZ points out that gold is difficult to transport and spend, which is why people prefer fiat money, which is much more liquid.
Indeed, he argues that, unlike the bitcoin, gold is fading, while bitcoin is just getting started.
With regard to the creation of large amounts of fiat money by the Fed, the CEO of Binance points out that it has not progressed yet and that this kind of change takes time to propagate into the real economy.
When asked whether bitcoin can be considered a safe haven asset, CZ responds by saying that its price might not go up when the Dow Jones index drops, or vice versa, because there is no perfect inverse correlation.
Finally, he argues that the current financial system is broken and that Bitcoin solves this problem.