Hey guys.
The record stock market crash of August 5, comparable to Black Monday in 1987, forced investors to reassess their portfolios. In this context, the World Gold Council (WGC) noted that attention has shifted to cryptocurrencies, especially Bitcoin, which some consider “digital gold”. However, the WGC argues that this comparison is wrong.
However, the WGC believes that this view is wrong, arguing that Bitcoin is highly volatile (60% versus 20% for gold) and behaves like tech stocks rather than a safe haven.
Gold and Bitcoin also have different correlations with other assets. Gold shows a positive correlation in rising markets and a negative correlation in falling ones, making it a safe haven asset in times of crisis. Bitcoin, on the other hand, often behaves like a high-risk asset, especially during periods of market turmoil.
It is important for a safe-haven asset to demonstrate resilience in times of crisis to be considered a reliable hedge. Despite Bitcoin’s popularity, it has not shown such resilience. During the August 5 crash, Bitcoin behaved like other risk assets, increasing overall portfolio risk.
Modeling has shown that adding gold to a portfolio reduces volatility and increases returns, unlike Bitcoin, which increases risk without offering true diversification.
In conclusion, WGC analysts argue that gold and Bitcoin are different investments. Gold remains a proven safe-haven asset, while Bitcoin, while useful for diversification, is no substitute for gold, especially in times of market turmoil.
Do you think Bitcoin is the new digital gold?
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