2024-09-03 00:26:05
Investing.com – When markets face volatility, investors often look for safe havens to protect their assets. Historically, this was the basis of security, but recently, often described as “digital gold”, trying to establish itself in this area.
Can a digital currency claim the safe haven status that gold has enjoyed for thousands of years? Peter Schiff, a well-known economist and critic of bitcoin, addressed the issue.
LEARN MORE: find out what is bitcoin and how does it work.
In his assessment, there is a big difference between bitcoin and gold. Over the past six months, crypto has depreciated by 8%, while the precious metal has appreciated by 23%. For him, this shows that he is losing ground in relation to the traditional safe asset.
“Looking at performance, it’s clear that bitcoin has failed to live up to its promise to act as digital gold,” Schiff argues, noting that much of the currency’s appreciation in 2023 is due to the euphoria surrounding with the spot ETF in the first two. months of the year. After this euphoria subsided, many of the investors who came in later faced losses, and most gold investors made profits this year.
The discussion about bitcoin as a safe haven asset is relevant amid current economic uncertainties. The United States is in debt at an unprecedented $35 trillion, and there are growing concerns about the stability of the dollar. These factors have driven capital towards traditional safe havens such as gold, which reached a record high of USD 2,514 per troy ounce in August.
Although bitcoin is promoted as “digital gold”, it has experienced significant price fluctuations. Since the record high of over 70,000 USD in March, there has been a sharp drop. Although people like Elon Musk have warned of the possible “destruction” of the dollar, theoretically creating a favorable case for bitcoin, the cryptocurrency does not seem to enjoy the same search for security and which is gold.
Some analysts point out that bitcoin and gold have not historically followed the same price patterns. Charles Edwards of Capriole Investments points out that there is typically a lag of around three months in which bitcoin follows gold price trends. This suggests that bitcoin may soon mirror gold’s recent rally, provided it overcomes its current stagnation phase.
There is also the argument that despite recent declines, institutional investors continue to bet on bitcoin, which is seen as a positive sign for its long-term future.
While the question remains whether bitcoin can be considered “digital gold” and a safe haven, Peter Schiff’s scathing criticism and current market trends show that the metal is still the asset of choice as a hedge. As long as bitcoin continues to exhibit volatility and uncertainty, it will be challenging to overcome the age-old trust placed in the yellow metal. However, the relationship between these two assets is an interesting area to watch going forward, especially during times of global economic uncertainty.
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