The “narrative that digital Gold is a better way to escape has not panned out,” declared market commentator Holger Zschaepitz, in the aftermath of Putin’s small “foray” into the Donbas region of Eastern Ukraine on Monday.

By “digital Gold,” he was, of course, referring to Bitcoin, one of the many ultra-risky assets that have been touted as safe-haven investments, but instead have been plunging into oblivion since the start of 2022.

Looks like Bitcoin will not be safe haven in geopol crises. Digital gold (Bitcoin) has plummeted to <$37k, while Gold has risen >$1900/oz. Correlation between digital & analog Gold is now even neg. Narrative that digital Gold is better way to escape has not panned out in Ukraine. pic.twitter.com/94bH8eV7V3

— Holger Zschaepitz (@Schuldensuehner) February 22, 2022

It feels like, at some point, that it’s going to become very tiresome having to go through a seemingly endless list of things of what Bitcoin is not. So far it’s been advertised as a payment system, a currency (which requires being a reliable unit of account, store of value, and medium of exchange), digital gold, an inflation hedge, and, in the recent case of the Canadian Freedom Convoy, as a way of “banking the unbanked”.

Now, we can add “acting as a safe haven during rising geopolitical tensions” to its long list of failures. In the various situations where safe havens are supposed to store purchasing power, Bitcoin has failed, usually in a speculator fashion, while time-tested ones like gold and the U.S. Dollar have delivered.

During the Covid-19 market panic in March 2020, arguably the most volatile period in recent market history, Bitcoin experienced a -38% intraday plunge, compared to gold’s 6% and the dollar’s 1% drop. Just last week, when National Security Adviser Jake Sullivan told staffers to “get out” of Ukraine “now”, gold rallied almost 2%, while Bitcoin fell sharply.

Bitcoin, however, still faces more pain ahead. After failing to gain value in the face of record-high inflation, it must now prove itself in the reverse scenario. Following an initial inflationary panic, inflation expectations have peaked, and the market for U.S interest rate futures (what the market expects interest rates to be at a certain time) has stalled, indicating that inflation has already reached its high point.

A quarterly backtest (i.e. the historical performance of an asset) shows that Bitcoin will experience the worst drop in deflation. But it is only when interest rates and oil prices start to plunge (neither of which have) that this will become apparent. Until then, we’ve not fully transitioned into a full-on risk-off scenario. That is when Bitcoin will truly feel the pain.