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Gold has been used for centuries as a safe haven asset, a currency, and a means of exchange or trade. Bitcoin is just over ten years old but is a new age, digital version of gold offering many of the same attributes, and even some additional benefits above and beyond the precious metal.
The two assets have been rising and falling in tandem over the last year, but why exactly, and what exactly does this mean for the first-ever cryptocurrency and its future as a replacement for gold?
Bitcoin and Gold: The Safe Haven Narrative Continues
Ever since 2019 first began, the leading cryptocurrency by market cap, Bitcoin, and gold, have been rising and falling in tandem with one another.
Gold is among the most trusted assets across any market, known for its use in trade since man first began to do so, and has proven itself for years as a safe haven asset that investors can use as a flight to safety during economic turmoil.
Related Reading | Stock Market, Bitcoin, and Gold: Everything Is Collapsing Together
Gold is considered a safe haven, due to the asset’s scarcity keeping prices relatively stable. The asset’s largest growth in price has always come during times of recession, with gold’s largest drawdown ever following the economic rebound that occurred post-recession.
During the last recession, however, Bitcoin was created as a means to disrupt the current broken monetary system built on ever-inflating fiat currencies and rebuild in a post-recession world.
Bitcoin was designed to share many of the same attributes that have given gold its value and longevity throughout the years. This includes a hard-coded digital scarcity, unlike any other asset.
While the gold supply is indeed scarce, there’s no telling how much gold is currently still left beneath the earth, or even in outer space.
There can only ever be 21 million BTC, however.
But Why Are These Two Assets Correlated?
Because the two assets are scarce, as investors see economic distress in the pipeline, more and more investors are moving their capital into these two assets: gold and Bitcoin.
The rise can be seen in early 2019, just as fears over a looming recession began to mount.
Bitcoin and gold both peaked in mid-2019, falling to a local low in late 2019, then going on a tear once again.
Gold has been leading Bitcoin slightly, suggesting that Bitcoin could rocket higher from here.
Related Reading | Has the Coronavirus Put an End To the Bitcoin Safe Haven Narrative?
If the precious metal happens to collapse, it could signal a fall in Bitcoin as well. But much of this depends on the overall health of the global economy.
With the stock market tanking, the coronavirus spreading, and fiat currencies on the brink of destruction, Bitcoin and gold will likely continue to stay correlated and rise as the capital flows out from traditional markets into the two safe havens.
