Investors Consider United States Treasury Bonds The Best Safe Haven Asset, But Bitcoin Has Proven Itself to Be a Far More Profitable Safe Haven Long Term

January 17, 2020 / by Zachary Mashiach

United States treasury bonds are considered the #1 safe haven asset, even more so than precious metals. Indeed, there are currently $15.6 trillion of treasury bonds, which is approximately 100 times larger than the Bitcoin (BTC) market cap. However, this article will detail how Bitcoin (BTC) has proven itself to be a much more profitable safe haven asset than treasury bonds long term.

Before understanding how Bitcoin (BTC) is a more profitable safe haven asset than treasury bonds, it is important to understand how treasury bonds work. When an investor is buying a treasury bond it means they are giving cash to the United States government and receiving a certificate in return which promises the money will be repaid by the government at a certain date plus interest. The reason that treasury bonds are so popular is that they are extremely safe, since as long as the United States exists they are guaranteed to be paid back.

At this time the United States offers 3 month, 6 month, 12 month, 2 year, 5 year, 10 year, and 30 year treasury bonds. The bond yields, i.e. the annual interest, for all of the bonds with a 5 year term and less are between 1.5% and 1.6%, with the 10 year bond having a yield of 1.8% and a 30 year bond having a yield of 2.3%.

Although 2.3% compounded annually for 30 years would turn $10,000 into $19,800, the presence of inflation ruins the profitability. Indeed, the Consumer Price Index (CPI), the official government measure of inflation, is precisely 2.3% right now.

This means that an investor who buys a 30 year treasury bond would lose purchasing power at the same rate they gain interest, and in the end they would make zero profits. In other words, the inflation rate negates the bond yield for 30 year treasury bonds. Further, any treasury bond between 3 months and 10 years actually loses value since the yield is even less than the CPI.

It gets worse. If inflation ever rises in the future, people who are buying treasury bonds now could end up losing significant amounts of money.

Compare this to Bitcoin (BTC), which is up 146% in the past year, up 3,800% in the past 5 years, and up roughly 290,000,000% since it began trading 10 years ago on BitcoinMarket at a price of $0.003.

The fact of the matter is that Bitcoin (BTC) has been incredibly profitable long term, and therefore it seems nonsensical that investors would choose to use treasury bonds as a long term safe haven, especially since treasury bonds yield no profits due to inflation equalling the yield.

The reasons that investors choose treasury bonds over Bitcoin (BTC) is because Bitcoin (BTC) is volatile and there is no guarantee that Bitcoin (BTC) will gain value. Also, all of the exchange hacks over the years have made Bitcoin (BTC) seem like an insecure asset.

Breaking this down point by point, Bitcoin (BTC) is actually incredibly secure if used properly. Any serious investor who is securing their own Bitcoins (BTC) simply needs to use Bitcoin Core, and to keep the private key in an extremely safe place where only they can find it.

For some investors the idea of losing all of their Bitcoin (BTC) due to losing the private key is an unacceptable risk, but fortunately there are now officially regulated and compliant crypto custodian services, and these services guarantee that an investor’s Bitcoin (BTC) will never be lost via bulletproof security and insurance.

As for volatility and the fear that Bitcoin (BTC) could end up losing value long term, it is indeed true that Bitcoin (BTC) has higher volatility than all other asset classes, and there is no guarantee of its future value. However, long term Bitcoin (BTC) has been consistently gaining tremendous amounts of value, and this is due to its fundamental characteristics.

Essentially, Bitcoin (BTC) is the first truly decentralized currency, giving it a competitive advantage over centralized fiat currencies. Bitcoin (BTC) exists in every computer that runs Bitcoin Core, and as long as any computer in the world is running Bitcoin Core then Bitcoin (BTC) will still run too. Also, there is no computer that a government or organization could seize to take over Bitcoin (BTC).

The decentralization of Bitcoin (BTC) makes it so no one’s Bitcoin (BTC) could ever be seized, frozen, or reversed, making it highly attractive versus banks. Also, Bitcoin (BTC) can be sent anywhere in the world instantly no matter the amount, as opposed to bank payments which can take days to send and could be blocked or reversed. Further, Bitcoin (BTC) often has a transaction fee of $1 or less even when sending billions of dollars, while banks require heavy fees for sending large amounts of money.

Beyond this, Bitcoin (BTC) has a fixed long term supply of 21 million coins, and can never be devalued by centralized money printing, unlike fiat which constantly loses value long term due to money printing.

Thus, all of these fundamental characteristics are why Bitcoin (BTC) has gained so much value over the past decade, and it is nonsensical to think that Bitcoin (BTC) will not continue to gain value, especially now that Bitcoin (BTC) is entering the mainstream. Indeed, the Bitcoin (BTC) market cap is only $160 billion, as opposed to stocks and bonds which have market caps in the tens of trillions of dollars, showing that Bitcoin (BTC) has tons of room to keep growing.

Therefore, Bitcoin (BTC) seems to be the obvious choice for investors who need a safe haven asset. Bitcoin (BTC) has the potential to gain significant value long term due to its fundamental characteristics which make it a competitive alternative to fiat. Compare this to treasury bonds which gain no purchasing power in a best case scenario due to the yield equaling inflation, and in a worst case scenario a treasury bond could depreciate significantly if inflation increases.

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