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Thursday, 20 February 03:37 (GMT -05:00)



Foreign exchange market

Bitcoin, Gold, and Crude Oil. Cryptocurrencies' Place Among Conventional Assets.


Can Bitcoin be called a safe-haven asset? This cryptocurrency is called the new gold or the digital gold, but many investors are really skeptical about these statements. 
 

Bitcoin and Gold

 

Not so long ago, when the tensions between the United States and Iran escalated, gold managed to set a new 7-year high, while BTC surged by around 20%. This raise a new wave of discussions related to the correlation between gold and Bitcoin.
 
Having taken a closer look at the price charts of both assets, we can see that gold reached the highest price level since 2013 earlier this month while BTC did that back in late 2017. OK, let's talk about how these two assets can be related. So, having analyzed the two markets over the period of April 2013 through December 2019, we can conclude that these two correlated at the level of 46,5%. Interestingly enough, we can see that the the same ratio between gold and Bitcoin used to be 60,3% in 2018 and increased all the way up to 70,8% in 2019. Some experts say that this indicates that the cryptocurrency market is getting mature.
 

Naive Cryptocurrency Investors' Dreams

 

Over the past week, the price of gold increased all the way up to a new major high - 1606 dollars per ounce. At the same time, Bitcoin recovered up to 8300 dollars per coin, which turned out to be the highest price level since November 2019.
With that being said, being focused on the price correlations alone, investors may come to the conclusion that gold and Bitcoin are truly related to some extent. However, the data is insufficient to be confident about this. Simply put, Bitcoin's data record is too short compared to the one of gold to be confident that the current correlation will remain the same in the future.
 

Crude Oil and BTC

 

Now let's take a closer look at the correlation between the markets of crude oil and cryptocurrencies. Apparently, after the conflict between the United States and Iran escalated, crude oil increased in price as well - around 4% with a couple of days. So, we can see a positive correlation of 22% in 2018 and a negative one of -3,7% in 2019.
 

What Is Bitcoin?

 

Once again, it's really difficult to say for sure what it is. On the one hand, it behaves like a safe-haven asset. It started surging back in 2013 during the banking crisis in Cyprus , and it keeps on growing now that we can get another conflict between the USA and Iran. However, is this sufficient to call it a safe-haven asset?
 
Over the long term, considering the past few years, Bitcoin can promise investors much biger profit potential than gold or crude oil, but this probably has to do with the speculative nature of the asset. So, calling it a safe-haven asset at this point is a questionable idea. On the other hand, Bitcoin is relatively free of governmental interventions and geopolitical risks. Which is why cryptocurrencies are gradually turning into the digital gold amid escalating geopolitical risks.
 
So, can we call Bitcoin a safe-haven asset? Not yet. But 2020 can really help it to make a few big steps to becoming one in the near future...

 

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