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Investor Data Points to More Gold and Bitcoin Hedges

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August 30, 2019 | 

885 Views | 

Darryn Pollock | 

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Despite the recent fall in the price of Bitcoin and the rest of the cryptocurrency market, there is data suggesting that retail investors are using both Bitcoin and Gold as a hedge against the growing global financial uncertainty.

Instances such as the bubbling trade war between the US and China, as well as fears of a global economic downturn or recession, are driving investors to look at alternative to the traditional markets for their investments. 

Gold has always been known as a good safe have, however, with governments controlling large swaths of the supply, and fears of price manipulation, there are investors who are starting to look at very alternate alternative - digital currencies. 

Many correlated the recent rise in Bitcoins price towards $13,000 with the news of federal cuts, European Central Bank dovish policies and a growth trade war. However, there are some who have said it has been purely speculative investment in this time of financial uncertainty. 

Data driven

The London Economic has reported, citing data from eToro, a United Kingdom-based multi-asset investment platform that deals in cryptocurrency, that there was a correlated uptick of positions in both Bitcoin and gold on its platform following news announcements of escalating trade tensions between the US and China.  

It makes sense that Gold would have an uptick at the same time as traditional market were taking a hit, but the uptick in Bitcoin investment speaks to a new era of digital gold and the perception that Bitcoin can be used as a safe haven during this time of uncertainty. 

EToro UK analyst Simon Peters has analyzed the data, noting that Bitcoin:

“Shares similar characteristics to gold in that there will only ever be a finite amount in existence (21 million), it’s decentralised, its price is not affected by inflation and it has the added benefit over gold of lower storage costs.”

Peters did also note that there is a lot that is not in favour of Bitcoin when it comes to a safe haven, noting that its reputation continues to be marred by perceived price volatility, alleged market manipulation and the prevalence of hacks in the cryptocurrency sector.

A true safeguard?

It is the similarities with gold that Peters believes is attracting new investors to Bitcoin, especially with its label at the moment being “digital Gold”

“Because the two share so many similarities and benefits, it’s not too surprising that a growing number of investors are betting on bitcoin as a safeguard. As the US/China trade war has escalated and more announcements of tariffs from both countries are made, we are seeing a greater number of positions being opened in both bitcoin and gold on eToro by retail investors,” added Peters

“Of course, considering bitcoin as a safe-haven asset might not be an easy thing to do. Extreme price volatility, hacks and allegations of price manipulation still weigh on its reputation, however the correlation with gold on eToro’s platform could be a sign that the overall perception of bitcoin is gradually shifting from speculative towards a lower-risk store of value.”

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