Safe-Haven Flip Underway as Gold Hits 4-Month High and Bitcoin Falls

Safe-Have Flip Underway as Gold Hits 4-Month High and Bitcoin Falls
Safe-Have Flip Underway as Gold Hits 4-Month High and Bitcoin Falls

Yerevan (CoinChapter.com) – Bitcoin (BTC) price has been overall bearish since mid-May. Considering ever-rising inflation, the cryptocurrency’s traditional rival gold looks more attractive to investors as the asset hit its highest value in the past 4.5 months.

Gold vs Bitcoin

Historically gold had been the safe ‘haven’ for hedging all kinds of assets. It is limited and valuable. However, with cryptocurrency arriving on the scene, many investors flocked to the “revolutionary innovation.” Bitcoin became a store value to millennials. Its demand pushed the prices upward by more than 100 percent in 2021, hitting almost $65,000. Nevertheless, they corrected in May by extensive margins, hitting as low as $30,000.

During the Bitcoin surge, the gold price was bearish, declining by 13 percent. Unlike Bitcoin, the treasured asset was greatly negatively affected by the Covid-19 pandemic. However, it looks like the demand for gold is high once again.

Gold price is on the rise. Source: GOLD on TradingView.com
Gold price is on the rise. Source: GOLD on TradingView.com

Many experts believe the parallels between physical and digital assets are growing. However, there are differences as well. Gold is scarce, but it does not have a foreseeable limit. Bitcoin, on the other hand, has a 21 million coin limit that cannot be crossed. Mainstream portfolio managers look into both assets as hedges. Given the recent crisis in the crypto market and the overvaluation fears in the BTC markets, gold looked much more attractive.

BTC…

…was close to its year-lowest. Briefly dropping down to $30,000, it traded at $38,020 in the New York session Tuesday.

As BTC declined, approaching it's year-low. Source: BTCUSD on TradingView.com
As BTC declined, approaching it’s year-low. Source: BTCUSD on TradingView.com

Many experts and crypto-skeptics consider Bitcoin too volatile to compete with gold. The narrative has merit. However, the alpha cryptocurrency has proven itself a useful hedge against inflation and the declining USD Index. The latter is the relative strength of the dollar against other fiat currencies worldwide.

Read more: Bitcoin Supporter Stan Druckenmiller Makes Serious Warnings About US Dollar

Why Bitcoin?

There are many fundamental believers among crypto supporters. They put their trust and assets in BTC because the decentralized nature of digital assets was revolutionary.

On the other hand, some traders were eager to choose crypto-only because of its bullish bias. Short-term gains were too attractive to pass, so more portfolios started, including Bitcoin and other cryptocurrencies.

As crypto started declining, many investors sought to secure their funds against fiat because of the growing inflation and subsequent risks. Thus, they went back to the conventional option to hedge their assets with gold, as gold was the safer option. It is too soon to tell if the crisis was, in fact, the ominous ‘bubble burst’ or a temporary setback. However, many investors believe the latter and hold their assets in crypto, resisting the panic-selling wave.

Read more: Bitcoin Week Ahead Ep05: Oversold Bounce Expected on Top Crypto Influencers’ Keynotes at Consensus 2021

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