The argument Bitcoin is a form of digital gold is being torn apart
Yes, the argument Bitcoin is a form of “digital gold” is falling apart. As the world’s largest cryptocurrency slips to $38,000, the lowest price since August, its decline in tandem with risk assets such as tech stocks is casting a shadow on a long-touted similarity to gold. Cryptocurrencies have plunged alongside equities in a rocky start to the year amid tighter-than-expected monetary policy, whereas gold -- often heralded as a store of value and an inflation hedge -- has steadily traded upward this month at 0.3%
Gold tends to be a low-volatility instrument, according to Steve Sosnick, chief strategist at Interactive Brokers LLC. Meanwhile, cryptocurrencies continue to demonstrate unpredictable price swings. Bitcoin has declined 17% since the start of January.
“If your premise is that you want to buying something as a hedge against distress, boring is great,” Sosnick said by phone. “Right now, I’d argue gold year-to-date is one of your best performing assets.”
Cryptocurrency enthusiasts, including Mike Novogratz, have previously said Bitcoin displays the qualities of gold as an uncorrelated asset. Yet, the 100-day correlation between the Nasdaq 100 and Bitcoin currently stands at 0.4, with a score of 1 representing complete harmony. Meanwhile, the same coefficient between gold and Bitcoin is 0.008 -- barely above zero -- indicting they’re moving only slightly in the same direction.
Earlier this month, analysts from Goldman Sachs argued that Bitcoin price could rise to a $100,000 price point, if it could win more of the “store-of value” market from gold. Instead, the digital asset’s signature volatility has come to fore.
As such, Bitcoin cannot be substituted for the same uses of the popular commodity, said Peter Schiff,
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