Many people are touting Bitcoin as the new #digitalgold. The #priceofaBitcoin, has already surpassed the #priceofgold, and was worth more than seven times an ounce of gold in January 2018; and that was after the tumble in Bitcoin prices.
However, whether Bitcoin can in actuality #replacegold (or the traditional government-backed currency for that matter) has been a fervent topic of contention and debate.
Some people like Cameron Winklevoss refer to the Bitcoin “gold 2.0” as they believe that it can “disrupt” gold. The #WallStreet also suggests that the Bitcoin can offer better returns as compared to gold.
Indeed, the Bitcoin has made the investors far more richer than gold, with the returns from the #cryptocurrency amounting to 1,116% in 2017, as compared to less than 12% in case of gold. But investors invest in gold to diversify their portfolio and to protect themselves against a #stockmarketdrop as gold has historically exhibited a negative correlation with the stocks i.e. when the stocks go down, gold rises, and vice versa. Furthermore, similar to cryptocurrency, gold is not controlled by a #centralbank or country.
Bitcoin is far more volatile than both gold and stocks and trades unpredictably, without exhibiting any relationship to other assets (even gold). An analysis by the Citi Private Bank revealed that #Bitcoinscorrelationtogold was .054 i.e., gold and Bitcoin trade in sync only about 5% of the time- a correlation so negligible so as to be insignificant.
Furthermore, the total value of Bitcoin has an upper limit due to its being vulnerable to #financialsabotage and due to the huge expenses required to maintain it. These vulnerabilities and volatilities of Bitcoin prevent it from serving as the same, safe financial haven as gold. However, the fact that the value of Bitcoin can rise independently of determinants such as #markettrading, bodes well for the investors, at least for now.
Because of this, analysts advise that investors should invest in a small amount of cryptocurrencies as long as they do not overwhelm the returns from the more traditional #bondsandstocks.
Inspite of the prophecies of experts regarding the dismal future of cryptocurrencies, the #Bitcoinbubble is here to stay- atleast for now.Tags: bitcoin, bitcoin’s correlation to gold, cryptocurrencies, finance, financial investments, gold prices, investment in gold, stock market, stock market volatility, stock markets and trading