Gold has been known from the beginning of the modern economy as the best safe haven during economic and political crises. Gold rose 49% during the 2008 global crisis, as investors resorted to it when the global financial markets declined. It also rose by 36% during the decline of global markets in 2011 due to the European debt crisis. It fell 2.75% in 2016 compared to the Standard & Poor 500 index, which fell 18% after the Brexit vote. Gold rose by an estimated 36% in the first quarter of 2020 after the pandemic.
After the great rise in the digital currency Bitcoin, many traders see it as an alternative to gold, especially during market turbulence, but is this true? Before expressing any opinion, the performance of both gold and bitcoin must be compared in the recent period during the market’s dark times.
From the beginning of February till March 2020, almost all assets fell. Gold fell by 13.4% and Bitcoin fell by 61.6%, and then both assets began to rise due to increased financial liquidity pumped by central banks to contain the crisis. During this crisis, Bitcoin prices fell 4 times more than the decline in gold prices. However, gold offset all its losses in just a month, unlike Bitcoin, which took three full months to return to its pre-covid levels.
Thus the chart below we see the performance of gold over Bitcoin during February and March.
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Source: Trading View
In February 2022, a geopolitical crisis between Russia and Ukraine began to loom as Russia invaded the Ukrainian border, leading to a significant decline in global markets. As usual, gold shines during crises, and it has risen by 7% so far, but Bitcoin is down 11%. The chart below shows great superiority in the performance between gold and Bitcoin since mid-February since the beginning of the Russian invasion of Ukraine.
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Source: Trading View
The chart below expresses the correlation factor within 100 days between gold and the NASDAQ 100 index, which currently reaches -0.70 compared to the 100-correlation factor between Bitcoin and the Nasdaq index which reaches 0.75, which indicates that there is a strong positive correlation between the Bitcoins and the NASDAQ index, as they move in the same fashion.
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Source: Trading View
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Source: Trading View
Based on all points above we can say that bitcoin does not have the characteristic of gold during economic crises and economic turmoil, so bitcoin cannot be considered a safe haven at all.
The content published above has been prepared by CFI for informational purposes only and should not be considered as investment advice. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell. The information provided does not have regard to the specific investment objectives, financial situation, and needs of any specific person who may receive it, and is not held out as independent investment research and may have been acted upon by persons connected with CFI. Market data is derived from independent sources believed to be reliable, however, CFI makes no guarantee of its accuracy or completeness, and accepts no responsibility for any consequence of its use by recipients