'Too early' to call bitcoin a safe haven as it outperforms stocks and dollar amid tariff turmoil

By Frances YueBitcoin bulls have long been frustrated to see the crypto trade in a fashion similar to stocks and other assets perceived as risky, rather than as a store of value such as gold. Now, some think they see tentative signs of a shift.They've argued that bitcoin (BTCUSD), as a decentralized, nonsovereign asset with a fixed supply, should trade more like gold, with an ability to hold its value against a backdrop of extreme market volatility. However, for years it has failed to do so, often moving in lockstep with U.S. equities.Bitcoin, however, has showed relative strength in the past few weeks against the U.S. stocks and the dollar, which both tumbled as the uncertainty around President Donald Trump's trade policies roiled global financial markets, noted Eric Rose, head of digital-asset execution at StoneX, in a phone interview with MarketWatch.Bitcoin was solid even as U.S. Treasurys BX:TMUBMUSD10Y - which are viewed as very much a traditional safe haven during periods of turmoil - also experienced a sharp selloff earlier this month before stabilizing later."I would describe the trading behavior of bitcoin versus every other asset over the last two weeks as strange, but not in a bad way," Rose said. Historically, it's rare to see stocks and the dollar retreat side by side, and it's also uncommon for bitcoin to rise while equities fall sharply, he said.However, that doesn't mean bitcoin is suddenly set to join the ranks of traditional safe-haven assets, said Mark Hackett, chief market strategist at Nationwide Financial."I'm not yet willing to say that bitcoin has become a store of value or a defensive holding, but gold clearly is," Hackett said. "What we've learned over the last couple of years is that bitcoin is much more risk-on than risk-off, until very recently."Bitcoin's recent strength may be driven by some idiosyncratic reasons that are not sustainable, such as MicroStrategy Inc.'s (MSTR) purchases of the crypto, Hackett added. MicroStrategy, a software company that is now more seen as a leveraged bitcoin proxy, bought another 6,556 bitcoins for $555.8 million between April 14 and April 20, according to a recent regulatory filing.It's "a little too early" for bitcoin bulls to claim that the crypto has become a store of value, though the trend is worth observing, Hackett said.For skeptics to eventually see bitcoin as an alternative to gold, the crypto needs to have a much longer and sustained period of performance that is not correlated, or moving hand-in-hand, with other risky assets, said StoneX's Rose.Over the past month, bitcoin rose 7.1%, while the Dow Jones Industrial Average DJIA fell 6%, according to FactSet data. The ICE U.S. Dollar Index DXY, a measure of the greenback's strength against a basket of its rivals, fell 4.7% during the same period.Still, bitcoin has been trailing gold, with futures for the precious metal rising 11% over the past month. Continuous gold futures (GC00) set a fresh record high on Tuesday and briefly traded above $3,500 for the first time, while bitcoin was still 14.5% below its record high at $109,225 hit on Jan. 20.Driving the bitcoin rally"I think it's possible that bitcoin has reached some level of institutional adoption where people don't necessarily view it as high-beta tech stock anymore, but are starting to view it on its own value," Rose said. High-beta stocks refer to those that have greater volatility than the overall market.The introduction of bitcoin exchange-traded funds last year opened pathways for more financial institutions to invest in the crypto, while a more friendly regulatory environment may have also encouraged institutional adoption.As the uncertainty around Trump's trade policy appeared to possibly tarnish the dollar's status as a reliable "safe haven" and its role as the de facto global reserve currency, investors may be looking at bitcoin as a potential place to hide during market turbulence, Rose noted."I think people are going to look for a global asset that is not denominated in anybody's currency and stands on its own," according to Rose.See: Deutsche Bank sees major trouble ahead for the U.S. dollarTo be sure, there is still a mix of narratives driving bitcoin's price, according to Joe McCann, founder and chief investment officer at crypto investment firm Asymmetric.McCann said that in his view, bitcoin may benefit from an increase in liquidity, but would be unlikely to suffer from a recession, as it doesn't have earnings or cash flows like companies do.Thus, if the Federal Reserve and other central banks lower their interest rates further to boost the economy, it could drive bitcoin up, regardless of how the global economy is doing, McCann added.Fed-funds futures traders are still pricing in an over 96% likelihood that the Fed will deliver at least two more rate cuts by the end of the year, according to the CME FedWatch Tool.Bitcoin edged up 0.1% Thursday evening to trade at $93,713. U.S. stocks ended higher on Thursday, with the Dow Jones Industrial Average up 1.2%.-Frances YueThis content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.