The relationship between bitcoin prices and gold prices has been one of the most discussed topics in cryptocurrency circles. The two markets have often moved together, though they have also had their unique periods. Since 2017, these two safe havens have become increasingly correlated.
One could argue that if bitcoin is digital gold and gold is a hedge against inflation fiat currencies, both should move in tandem with each other. However, it’s not just about price movements; there are several other factors to consider when examining this budding relationship between Bitcoin and Gold prices.
Bitcoin (BTC) and Gold Prices
Whether a bitcoin enthusiast or a gold bug, it’s essential to understand the relationship between these two safe-haven assets. In 2017, bitcoin and gold prices were positively correlated, with both significant safe havens peaking in June at around $3,000-3,100. While this correlation is promising for bitcoin as a potential long-term replacement for gold, there have been several instances where their price movements have been negatively correlated.
However, investors generally see Bitcoin as similar enough to gold that they are comfortable investing in both if they see declining stock prices or high inflation rates affecting other asset classes such as stocks or real estate.
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Will Bitcoin (BTC) prices and gold prices collide further?
Bitcoin and gold may have different characteristics. One is digital, while the other is physical. But they both have their place in your portfolio if you’re concerned about an uncertain future or want to preserve some of your wealth outside mainstream financial institutions.
Historically, the two markets have had a positive correlation. This is a relatively new trend in their relationship. Before 2017, they had little correlation. They even seemed to go in opposite directions at times.
Bitcoin and gold prices have many similarities. They are both commodities, and they are similarly traded on markets. Both products have seen their value increase over the last decade, with gold rising from about $300 an ounce in 2006 to over $1,200 today and bitcoin going from about $0.05 per coin to nearly $6,000 at its peak in December 2017.
While it’s tempting to think of bitcoin as digital gold and therefore assume that there is a relationship between the two, that’s not the case. While there is some overlap where you can store value and make transactions, there are also significant differences between them. Both are digital currencies, but bitcoin is not a reserve currency like gold, nor does it function on a global scale.
Bitcoin has just started gaining traction among private individuals looking for alternatives to fiat currencies. The same goes for gold. It hasn’t been adopted by central banks or government institutions globally either, but many nations have begun using their own version of “digital gold” to facilitate cross-border payments securely without using traditional methods.
A diversification benefit could also exist between bitcoin and gold prices.
In practice, bitcoin and gold prices are often correlated. This means that when one goes up, the other also tends to go up. But this relationship is not always the case. When comparing the two assets, it’s important to remember that they are not the same thing and should not be used interchangeably. Gold is an investment asset class, while bitcoin is a pure currency.
It’s also worth noting that these assets have experienced tremendous growth in recent years as they’ve become more popular with investors worldwide. But their growth rates aren’t strictly comparable. The value of gold has risen over 1 percent per year since 2010. Meanwhile, bitcoin has seen its value increase by over 1,200 percent during that same period.
This relationship between bitcoin and gold prices has been growing more vital for some time now. While the correlation is not perfect, there are many similarities between the two markets that make them a good fit for each other. If you want to trade in bitcoin, use The Crypto Genius platform to help you get the most out of your bitcoin trading. However, as we have seen from history, things can change quickly regarding investments like these. So while this may be a good bet now, please don’t count on it staying that way forever.