Gold’s price continues to rise while Bitcoin flounders, even though they are both seen as hedges by investors
Big banks have come out in open support for Gold, based on the current climate. Goldman Sachs, JP Morgan and Morgan Stanley have all made statements citing the advantages of adding Gold to one’s portfolio.
During uncertain economic recoveries, Gold is often a great hedge against commodities markets, to which it tends not to be linked.
Markets are currently particularly susceptible to further coronavirus related downturns, and with a second wave imminent according to some, Gold looks to be a safe bet.
Gold should have set a new ATH by the end of the year if it continues to rise at current rates.
In a report by Bloomberg, a number of factors that support Gold are also cited as benefitting Bitcoin. Yet the benchmark cryptocurrency, often referred to as ‘Digital Gold’, has been floundering around the mid to low $9,000s for the past couple of months.
The Bloomberg report, however, is confident in Bitcoin and its future price movement, evidenced by bold section headings like ‘Something needs to go really wrong for Bitcoin to not appreciate’. Bitcoin’s relation to the crypto market is also directly compared to Gold’s relationship to commodity markets.
There are also virus-specific booms to Bitcoin, such as the increasing digitisation of payments and the desire to do so with currencies. No matter the eventual levels of devastation coronavirus has on the world economy, its profound impact on people’s attitudes towards money and systems of payment are already ingrained. Bitcoin’s position as the original cryptocurrency puts it in a unique position to benefit off such a shift in attitudes.
Bloomberg’s report lays bare the factors that stand irrevocably in support of Bitcoin, yet now at the end of June, the coin’s price still remains low at around $9,150. The implied message here is to be patient and trust in the economic phenomena that can be seen at work.
Too often Bitcoin, and cryptocurrencies as a whole, are seen as a quickly appreciating assets; but that is often not the case.
What is clear is the disparity between Bitcoin and Gold. It will take years, maybe decades for the level of trust inherent in Gold to be surpassed by the likes of Bitcoin, or its potential future successor.