The leading cryptocurrency "bitcoin" has recently become the focus of attention of large companies and individuals alike, against the steady decline in the price of gold since the beginning of the year. Can Bitcoin become a safe haven like gold?
In a report published by the French newspaper "Lesechos" (lesechos), Marion Hillman asked whether Bitcoin is closer to leading than gold, and the recent decline in the price of the cryptocurrency, after reaching record levels last week, is expected to dampen the hopes of investors who thought It could be a new safe haven just like gold.
This hypothesis has gained popularity in recent weeks, especially after Tesla announced an investment of $ 1.5 billion in Bitcoin, a move that reflects the increasing interest that this currency has received by companies, as demonstrated by BlackRock. PayPal and Mastercard International are interested in this currency, while JPMorgan Chase announced that it is studying the issue of investing in it, and many individuals have flocked to platforms Trade like Robinhood to buy cryptocurrencies.
This demand led to the doubling of the price of Bitcoin 4 times in 2020, with a 70% increase since the beginning of the year, reaching a value of 48,315 dollars, and the market value exceeded one trillion dollars last week, according to what the strategists said to "GB Morgan" early January “The competition between bitcoin and gold has already started before our very eyes”.
Millennials are gone
The price of gold has declined continuously since the beginning of the year to record the worst performance of all commodities that make up the Bloomberg Index, and unlike last year, the price of gold rose sharply and was a safe haven in the context of the health crisis and the low interest rate, but its price fell again due to sudden resistance For the dollar and higher US government bond yields.
In his Twitter post, one of the founders of the billionaire mutual fund company, Jeffrey Gondlach, who has been for years a staunch advocate of gold, expressed that he had changed his mind and preferred to invest in Bitcoin.
The author explained that fear of a return to inflation and a decline in the value of traditional currencies, in addition to the fluctuation of the dollar's price, made Bitcoin a safe haven for many investors.
For his part, Christian Pariso, chief economist at Aurel BGC, believes that "Bitcoin is the gold of the millennial generation," stressing that the two share commonalities in scarcity, security and lack of basic value as well, as their value depends on investor confidence.
The risk of exchanging one bitcoin for another cryptocurrency always exists (Getty Images)
Distrust of central banks
Although supporters of the cryptocurrency call Bitcoin "digital gold", its market value is still far from the total value of private sector investment in gold, and to become so: its price should reach $ 146,000 in the long run, according to JP Morgan.
Pariso believes that what is fueling the rise in the price of Bitcoin at the present time is the distrust of central banks, and the belief that Bitcoin can become a currency in itself, but he does not believe that this is a verifiable scenario due to the technology associated with the cryptocurrency that requires a lot of time and energy to conduct the slightest transaction. Some institutions have begun to take an interest in Bitcoin, but their bets are not comparable to the bets of large insurance or retirement funds invested in gold.
Moreover, the volatility of the Bitcoin price remains a major problem, and this is perhaps what the recent irregular movements reveal. According to JP Morgan analysts, last week, “Bitcoin’s volatility has reached 87% in recent months, compared to 16% for gold. ".
In its short history, this cryptocurrency has witnessed periods of prosperity and devaluation, but this is not the case for gold, whose prices also experience fluctuations, but in different proportions, given that the market is more mature.
The author concluded that the danger remains, always, in replacing one currency with bitcoin with another cryptocurrency, whether it is a Libra from Facebook or a cryptocurrency supported by a central bank.