Bitcoin or Gold. Who Will Take the Safe Haven Crown?

Gold has long been considered a safe-haven asset, but recent geopolitical shifts and market dynamics have propelled Bitcoin into the spotlight as a potential alternative. In April, U.S.-China trade tensions drove gold prices to a record high, but a tariff truce in May led to a decline in gold demand. Meanwhile, Bitcoin surged 15% in May, fueled by supportive legislation, rising ETF demand, and its digitally scarce nature. As policy and investor sentiment evolve, the debate between gold and Bitcoin as the premier safe haven continues, highlighting the need for investor adaptability.

View Article

*Source: https://medium.com/@joel.woodyard/gold-vs-bitcoin-similarities-in-thesis-2023-59f7ed2f55ed  

For a century, gold has been the emblem of safe-haven during conflagrations in the economy. However, a novel and precious form of currency, dubbed as “digital gold”, has skyrocketed in its stock price. Analysts suggest that the rise of Bitcoin was correlated with policy shifts, market psychology, and evolving notions of what determines a safe haven.

During April, growing tensions of tariff fight between the US and China drove gold to an all-time high of $3,488 per ounce as there was turbulence in governmental policies. However, during May, the leaders US and China met together to declare a 90-day tariff truce. This truce mitigated the fear of trade problems, and throttled the demand of gold. As a result, gold prices have fallen 0.3 percent, raising concerns among strategists.

While gold prices have been stagnating, Bitcoin has been on a positive note, notching a 15 percent gain during May. The catalysts of the rise of Bitcoin include the Genius Act that legitimized stable-coins and supported digital currency. Moreover, Bitcoin exchange-traded-funds (ETFs) enjoyed a rise in its price, as pension funds granted asymmetric returns. In succession, ETF issuers had to purchase more Bitcoin to match the demand, creating a self-reinforcing demand loop. This self-reinforcing demand loop exists because with more demand, the prices increase, strengthening the investment value of Bitcoin. In turn, this leads to more ETF issuers to issue Bitcoin ETF and eventually buy more Bitcoin to back them up. 

Bitcoin’s ascent represents a shift in investor decision making. While gold’s tangible nature provided comfort, Bitcoin’s complex algorithm offered a similar, or superior value to gold. Bitcoin’s complex algorithms and strictly limited supply is the reason why Bitcoin offers a similar or superior value to gold. According to Lydia Grant, chief strategist at Meridian Digital Partners, digital scarcity of Bitcoin resembles the metallic scarcity of gold.

Whether Bitcoin or gold will prevail is unpredictable, but President Trump’s administration acted in a conciliatory manner for cryptocurrency. Through acquiescence toward policies regarding digital assets, the new government could cement Bitcoin’s role as a superior choice in their value to gold.

In the interim, investors are faced with a new challenge: to balance a centuries-old refuge against a rising decade-old invention. Whether gold or Bitcoin holds the crown of safe haven, this episode portrays the need for investors to stay vigilant at all times to the infinitely redefined definition of a safe haven.