Bitcoin as Safe Haven and Friend of Gold

Posted | 25/02/2020 / Views | 5355
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In the first few days of the year, volumes in Bitcoin markets doubled. Amid an ongoing bear market, investors and fans saw a silver lining on the horizon. Around the escalation of tensions between Iran and the USA, Bitcoin was traded as a safe haven asset. The correlation with gold was stronger than it has been for years. The mood on the Bitcoin market has also improved as a result, with sentiment no longer being bad but neutral.

Bitcoin as Safe Haven and Friend of Gold

Bloomberg analysts even see gold as a proxy for the Bitcoin price because the assets are so similar. Both are scarce in quantity and are particularly suitable for value storage. Bitcoin has the advantage of simplified transport and dominates in the digital world. Gold has the advantage of a history going back several thousand years - and dominates in the real world.

"The fact that a store-of-value asset with fixed supply and increasing adoption is more likely to appreciate in price will keep Bitcoin supported in 2020. We expect movements in gold to remain a proxy for Bitcoin. The broader crypto market is at risk of more mean reversion of the parabolic 2017 rally and depends on advancing Bitcoin for buoyancy. Our takeaway is straightforward: Bitcoin is winning the adoption race, notably as a store-of-value in an environment that favours independent quasi-currencies."

The experience from Iran and the price movements in early 2020 clearly show in the eyes of Bloomberg analysts that Bitcoin is establishing itself on the market as a store of value. Again, the similarity to gold is striking. Unlike many in the crypto-community, analysts do not see gold and Bitcoin as enemies, but as friends: "Gold prices will keep climbing in 2020 and so should Bitcoin, in our view. The digital version of the metal is in the maturing process of consolidating the rapid price appreciation of its youth. Bitcoins' ever-more inverse relationship with the U.S. dollar indicates the maturation process of the new quasi currency toward a digital version of gold."

The correlation between Bitcoin and gold had already been on an upward trend since the beginning of 2019 and, according to the analysts of Arcane Research, reached a peak in January 2020, which was last seen in the summer of 2016.

“The (Peterson) correlation between gold and BTC rose to 0.217, last seen in October 2016.” - Coin News Telegraph.com