The outbreak of the COVID-19 pandemic rattled many industries; lockdown restrictions caused minimal economic activities in different parts of the world. Amid the uproar, many asset classes collapsed, Businessinsider reported an all-time low of $-40/barrel for Brent crude oil. While many assets were failing, investors were desperate for safe havens to keep their money.
Interestingly, for the first time in New York trading, gold's price reached an all-time high of $2000/troy ounce on Tuesday, August 5, 2010. This didn't surprise many investors; gold has a very long history of reliability during any recession or economic meltdown. The price plunged due to its increased demand and low supply.
Similarly, bitcoin investors have enjoyed their fair share of profits and rest even in the pandemic period. For the first time in over a year, traders saw bitcoin pierce the $11,000 resistance, and experts predict that it may well be heading to the $15,000 mark in the next couple of weeks. Compared to its price of $8,000 in February 2020, the price will probably double before the year runs out.
See Sally Ho's technical analysis for more.
COMPARING BITCOIN AND GOLD
While other asset classes and even stocks are failing, gold and bitcoin are thriving and heading for new all-time highs, let's look at how these two compares:
VOLATILITY: After December December 2017, bitcoin investors witnessed a rough period, the price of bitcoin plummeted from about $20,000 to $3,000 over the year. This has been the most significant drop in bitcoin in recent times, and it misconstrued cryptocurrencies as a failure. However, we know that this is not the case; many factors control the price of cryptocurrencies. Majorly because bitcoin is independent of a body of control. This is responsible for its higher volatility.
Alternatively, gold is historically known for its very little supply over time. It is nearly impossible to have an overwhelming supply for gold's demand. Hence, the price is usually more stable and is responsible for its reputation as a safe haven.
However, we know that volatility is a double-edged sword; in a failing economy, bitcoin quickly rises above many odds to trump many other asset classes.
REGULATIONS: The idea of bitcoin and cryptocurrencies stemmed from an attempt to insulate investors from the endless regulations of government and third-party financial institutions. However, bitcoin has faced staunched criticisms to the extent of being banned in some states.
Currently, bitcoin is still banned in more than six countries altogether. While some countries are now permitting the distributed ledger to operate, the fight against bitcoin as a mainstream currency is long, and regulations might still keep many investors away.
On the other hand, gold is almost as old as man; it has served countless generations as sources of wealth transfer and ownership. Indeed, if one were to consider regulations and gold, gold is readily accepted worldwide.
Indeed, gold might look like the undisputed safe haven for many investors; bitcoin is not far behind. It remains to see how Satoshi’s brilliant invention unfolds in the years to come.