Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Bitcoin vs Gold debate: which is the real safe haven?
Over the last few months, there’s been a lot of coverage on cryptocurrencies, namely Bitcoin, and its status as “digital gold.” The reason it is often referred to as “digital gold” is that bitcoin was seen to have been able to provide a store of value like gold. An uncorrelated asset won’t fall when the stock and bond markets tumble. Instead, it travels in the opposite direction.
Bitcoin’s safe haven status was put to the test these last few months following the outbreak of the Ukraine war. With inflation fears running high, Bitcoin was unable to retain its safe haven properties and shed more than 40 percent of its value, tumbling below US$30k, making it one of the largest falls in history. Investors offloaded cryptocurrencies in similar fashion to risk on assets. Bitcoin is increasingly acting like just another tech stock and has largely mirrored losses experienced
in the Nasdaq, a benchmark that’s weighted toward tech stocks.
Bitcoin’s crashing price over the last month, shows that vision of Bitcoin being “digital gold” is a long way from reality. On the surface at least, Bitcoin and Gold have two things in common, notes Kanish Chugh, Head of Distribution at ETF Securities who says, “Both have finite supply. Both are stores of value. Both are seen as currencies without governments.”
“But the two are also very different. Gold has a much longer history than bitcoin. It has been used in financial systems for millennia. As coinage in ancient Egypt and China’s Ming dynasty, to the gold standard and modern ETFs. Empires come and go, yet gold always remains. Gold is significantly less volatile than bitcoin,” says Chugh.
And that’s where the similarities stop. Gold has held its safe haven status for years because of its historically low volatility whereas bitcoin’s high volatility which has caused movements both on the upside and downside, nullify it as a safe haven asset. Chugh says, “”Gold is also more regulated. Gold mostly trades in London under the supervision of the Bank of England. While bitcoin mostly trades on unregulated crypto exchanges.”
“These differences mean there is room in portfolios for both – if investors are so inclined. For those interested in comparing gold and crypto, please see our comparison table below,” he notes.
