Sunday, March 24, 2019

Report: Bitcoin is a Safe Haven and Not Yet a Digital Gold

Longhash, a Singapore-based Data and Media Platform on January 9 made comparisons between Bitcoin, Gold, and the U.S dollar. In their opinion, this digital currency’s price has shown a negative performance to the duo. As such, conclusions have been made that Bitcoin is a safe haven and not a digital gold.

Comparing Gold’s Price Chart With Bitcoin

According to the media platform, its comparisons were made using Bitcoin’s and Gold’s price trend in the past year. In their findings with a 180-day data provided by Cboe, a stock exchange, and Bitfinex, a cryptocurrency exchange, they noted that the trend of these assets did not match.

While disparities existed between both assets from January to August 2018, there were similarities from September to November 2018. A generalization was then made that in the long run, these two had no similarities in their price charts. Also, Bitcoin exhibited a more negative price trend over the past year.

Report Says Bitcoin is More Like a Risk Asset

The report says investors interest in the digital asset may have dwindled, which led to its bearish trend. Consequently, this makes the coin maintain its position as a safe haven rather than the new digital gold as some may have presumed. It is also stated that: “Bitcoin is more like a risk asset.”

When it came to the comparisons between Bitcoin and the Dollar, the pair also showed a negative correlation. The report notes that from May 2017, there have been dissimilarities in their price chart, but a particular behaviour has been peculiar. This is a characteristic where Bitcoin’s price dumps and then the Dollar rises in value, and vice versa.

The Strength of the Dollar Discourages Investment in Bitcoin

An instance of this was given, that as at January 2018, when the cryptocurrency hit an all-time high of $20,000, the dollar index was 90. However, when the digital asset plummeted over 70 percent, the index moved to 96. This was attributed to the fact the weakness of the fiat, made investors have more interest in buying Bitcoin. Whereas its strength which brings about less liquidity discourages them from taking the risk.

Therefore, it has been concluded that Bitcoin is a risk asset. It no longer a hedge since its price is also largely determined by the liquidity in the traditional market. Despite this report, crypto experts may have a different opinion. These are people who have predicted that in 10 years from now, Bitcoin will be massively adopted and remain a store of value.

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