Bitcoin has shown that it can be used as a hedge against risk. Gold’s latest ascent has presented a safe haven investment scenario, and this trend could strengthen the case for owning $ BTC.
Gold prices hit a seven-year high and have grown rapidly in the past six months
Gold peaked in seven years above $ 1,600, having seen rapid growth in the past year. Despite booming stock markets, geopolitical and stock market fears still strengthen the case for investing in gold. After a relative slump, gold is again in the ascent, showing that risk-resistant assets still have significant appeal.
Gold posted a 7-year high yesterday. Will bitcoin usher in an era of digital commodities trading desk in the years to come? pic.twitter.com/jJCvy363BL
– bias (@skewdotcom) February 21, 2020
Gold has a traditional inverse relationship with riskier assets. For BTC, this relationship is not yet established. The coin has shown uptrends during times of instability, but also sudden price declines which can make it a smaller store of value than gold.
For now, the consensus is that Bitcoin should be a small part of its portfolio, to profit from the rise. Gold, on the other hand, remains traditional, but even during a streak of gains, its upside potential is much more conservative.
Gold has gained about 15% in the past year, and of those, 7% in the past six months alone. Meanwhile, BTC has fluctuated, while maintaining over 100% gains over the past 12 months. Gold traded at $ 1,643.62 in the spot market. Bitcoin was trading around $ 9,617.74, slightly above its current support level.
The advantage of gold is its high liquidity, with several traditional trading desks and investment tools. Gold rose significantly after the introduction of exchange traded funds (ETFs).
For Bitcoin, however, introducing an ETF has been notoriously difficult, with multiple rejections from the United States Securities and Exchange Commission.
The physical property of gold, Bitcoin, can be used as a hedge against inflation
As with gold, physical demand and holding of Bitcoin becomes optional in 2020. There are tools for exposure to the price of BTC, including futures, options and certain types of derivatives traded on European exchanges. . But there is also no restriction on physically owning Bitcoin, and this opportunity is available to both institutional and retail investors.
If you don’t have any gold (or BTC) yet, I will start rectifying that soon.
I wouldn’t own paper gold or âpaperâ BTC for anything beyond short-term trading – for the first time in decades owning the real thing can be important. https://t.co/fN3ltfi9xg
– Luke Gromen (@LukeGromen) February 14, 2020
For now, digital asset trading desks are not going to go mainstream. The Bakkt Futures Exchange is the largest mainstream market for BTC futures contracts. The spot and over-the-counter markets still build on the legacy of the early days of cryptocurrency, when these transactions were largely unregulated and small-scale. Now trading is growing, but there is still no consensus on the approach to market regulation and tracking bad players and risky trade moves.
What do you think of the safe haven properties of gold or Bitcoin? Share your thoughts in the comments section below!