Bitcoin’s Safe-Haven Role Depends on Market Conditions

Bitcoin’s ability to hedge against crises is central to its investment thesis. As “digital gold”, Bitcoin is expected to provide some level of protection against inflation and currency debasement.

However, inflation and currency devaluation are not the only financial shocks possible. For example, trade wars can also impact stock market valuation and returns.

In a new study, researchers at Toronto Metropolitan University (Canada), the University of Ghana, and the University of Navarra (Spain) investigate Bitcoin’s (BTC ) hedging properties against trade policy uncertainty shocks across different investment horizons.

They found that it depends on the investment horizon: in the short term, Bitcoin provides little to no protection; in the long term, it is positive, but only for the middle range of the Bitcoin-return quantiles.

They published their findings in The North American Journal of Economics and Finance¹, titled “Does Bitcoin hedge trade policy uncertainty shocks? horizon- and state-dependent evidence from wavelet and quantile regressions”.

Rising Trade Policy Uncertainty

In the past few years, the assumption of smooth free trade between major economic blocs has been increasingly shaky. This has had major implications for investors, as it created external shocks impacting all asset classes due to disrupted supply chains and increased volatility.

“High-stakes tariff negotiations between the United States and China in 2018–2019, a series of Brexit-related trade debates in Europe, and renewed protectionist rhetoric in 2025 have all shown how rapidly shifting trade rules can send shockwaves through equity, commodity, and currency markets. ”

“High-stakes tariff negotiations between the United States and China in 2018–2019, a series of Brexit-related trade debates in Europe, and renewed protectionist rhetoric in 2025 have all shown how rapidly shifting trade rules can send shockwaves through equity, commodity, and currency markets. ”

Trade policy uncertainty is different from stock market volatility because it arises from changes in trade rules and policy decisions. Its effect can spread across financial and commodity markets, but they are not captured in the same way by broad market-volatility measures.

To deal with this sort of shock, investors frequently turn to safe-haven assets like gold, U.S. Treasuries, and, more recently, cryptocurrencies such as Bitcoin. But as a relatively new class of asset, it is unclear how much protection against trade disruption cryptocurrencies provide. This is why this study can provide valuable information for investors in a period of rising geopolitical tensions.

Bitcoin’s Hedge Against Trade Wars

Gathering The Right Data

The researchers gathered daily prices from January 2, 2018, to May 31, 2025. Price data for Bitcoin, the S&P 500, and the U.S. dollar index were obtained from Yahoo Finance, and the gold spot price was obtained from Dukascopy.

The Daily Trade Policy Uncertainty (TPU) data were obtained from the Economic Policy Uncertainty database developed by other economic researchers, which shows a clear series of spikes after 2020.

Source: Economic Policy Uncertainty

These data were analyzed with mathematical tools, wavelet multiscale decomposition, and the quantile-in-quantile approach (QQ).

Conditional Hedging Properties

The wavelet decomposition shows how the volatility and temporal characteristics of Bitcoin returns change over different investment horizons.

“Specifically, higher-frequency components (such as D1, D2, D3) capture swift & short-lived fluctuations, and lower-frequency components (e.g., D4, D5, D6) reflect more persistent, cyclical trends.”

“Specifically, higher-frequency components (such as D1, D2, D3) capture swift & short-lived fluctuations, and lower-frequency components (e.g., D4, D5, D6) reflect more persistent, cyclical trends.”

Source: The North American Journal of Economics and Finance

This analysis reveals that for raw Bitcoin returns and the short-horizon D1 and D2 components, Bitcoin’s response to a trade policy uncertainty (TPU) shock depends on Bitcoin returns when they occur. It is mostly positive but turns negative for the highest return quartile (when Bitcoin is providing the highest returns).

In the long term, further increases in TPU during shock periods are generally associated with weaker Bitcoin returns.

Source: The North American Journal of Economics and Finance

Investors Takeaways

This study shows that, under certain conditions, Bitcoin can provide some protection from uncertainty and volatility caused by trade wars and trade disruptions.

However, this effect is mostly conditional. It is more pronounced during periods of “normal” returns or losses on Bitcoin, and during episodes of trade policy uncertainty that are relatively moderate.

When Bitcoin is in the lowest or highest return quartile, it no longer provides investors protection. Similarly, the most violent shocks tend to cancel Bitcoin’s hedging properties.

Overall, these results do not support a stable safe-haven relationship between Bitcoin and trade policy uncertainty shocks. Any favourable response is limited to particular return states and investment horizons.

This does not mean that this weakens Bitcoin’s long-term opportunity. Only that it does not give investors dependable crisis protection for every type of crisis.

It should also be noted that the study does not test hedge ratios or portfolio risk reduction, and its sample ends in May 2025. This limits its application to Bitcoin today, as crypto markets are evolving quickly as they turn into a mainstream asset class.

Investing In Bitcoin

Strategy

MSTR Price Chart

MicroStrategy was, at its core, a software company. Its main product is MicroStrategy ONE, a business intelligence platform. This type of enterprise software is designed to combine business metrics to help decision-makers better understand their company’s activity and revenue drivers.

While MicroStrategy was a respected but somewhat niche tech SaaS company, its Bitcoin activism brought it into the investing spotlight.

For the last few years, the company has been buying more Bitcoin, often ignoring the short-term fluctuations and focusing on the high price it considers Bitcoin will reach in the long term, making it the largest institutional holder of Bitcoin, even above the largest ETFs.

Source: Strategy

Even if Strategy acquired many Bitcoins at a low price, it also acquired some at a higher price, resulting in a total acquisition cost of $64B and an average purchase price of $75,000. In total, Strategy owns more than 4% of all Bitcoins in existence.

Source: Strategy

Around the end of 2025, Strategy was under pressure and at risk of being delisted from major indexes. In response, it created a large cash buffer and a popular high-yield Bitcoin derivative like STRC, the first BTC treasury perpetual preferred stock with monthly variable dividends, as well as daily dividend distributions that began on November 1^st 2026.

The company holds as much as $5.1B in USD at the end of 2026.

Source: Strategy

While the stock is still down from its all-time highs, this has stopped any risk of panic on Strategy’s stock, at least as long as Bitcoin itself stays at a high enough price.

Today, Strategy is still a way to invest in Bitcoin with some added potential for profits compared to directly owning Bitcoin, but also higher risks.

Historically, it has amplified Bitcoin price volatility, both on the upside and downside, something investors should be aware of and incorporate into a diversified portfolio accordingly.

Source: Strategy

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¹^{. Samuel Asante Gyamerah, Perpetual Andam Boiquaye, and Luis A. Gil-Alana. Does Bitcoin hedge trade policy uncertainty shocks? horizon- and state-dependent evidence from wavelet and quantile regressions. The North American Journal of Economics and Finance. January 2027. Article: 102743. Volume 87.}^{10.1016/j.najef.2026.102743}

Jonathan is a former biochemist researcher who worked in genetic analysis and clinical trials. He is now a stock analyst and finance writer with a focus on innovation, market cycles and geopolitics in his publication 'The Eurasian Century".