Gold and Bitcoin
When cryptocurrency first came, people considered it a good alternative to fiat money. Fiat money is what we use nowadays. It is issued and controlled by governments and their central banks. Crypto was considered the new gold but during the global tension, a rise of 15 percent was seen in gold. But Bitcoin came down by 1 percent.
Gold is considered the best option to avoid inflation and uncertainty. This year gold is at record high. Despite recent improvements, it has increased by 44% this year. Crypto like Bitcoin and gold have a lot in common. Their supply is not in the hands of any government. Rather, their very design limits their supply. In theory these can also protect against inflation and uncertainty. But this year his performance was not at all like gold. Bitcoin has increased by only 13% this year.
Gold vs crypto in times of market tension
From March to mid-April, when Trump imposed heavy tariffs on US exports, there was a huge decline in global markets. Even during that tense period, gold rose by 15% and Bitcoin fell by 1%. That means gold was doing its job in uncertainty. Was giving positive returns. Could not give bitcoin. This is where crypto became weak.
Why is Bitcoin not a safe asset?
- Gold is physical, Bitcoin is digital- No matter what happens, the value of gold remains. But Bitcoin needs infrastructure to run. Will your broker be able to cash out your crypto in a crisis? no guarantee. In a major crisis, access to Bitcoin may also be closed. Therefore it is weak as a safe asset.
- Crypto supply is not really fixed- According to the report of Financial Express, the supply of Bitcoin is limited to 21 million. But there are thousands of other cryptos. Any new crypto can be launched. If a better crypto comes, will people sell Bitcoin and buy it? The value of Bitcoin is high only because it is the most popular.