Talks of Bitcoin and other cryptocurrencies’ legitimacy as an investment have been circulating for the past year.
Some have even gone as far as to call Bitcoin the new “digital gold.”
However, when a cryptocurrency like Bitcoin sees a 30% one-day drop, we wonder how anyone could consider it a safe haven for wealth.
Take in mind that a bear market is considered when an asset experiences a drop of more than 20% in value from its all-time high price.
Typically, when a market is as fickle and as volatile as the cryptocurrency market is, it becomes unattractive to institutional and retail investors seeking risk-averse vehicles.
Jim Angel, a professor specializing in financial markets at Georgetown University, may have summed it up best in a recent Bloomberg article, “Most real corporations don’t want to have volatile things on their balance sheets, as the fluctuations cause fluctuations in their reported results…”
“The only companies that will dabble with cryptos are ones where the CEO is a true believer in crypto, and the CEO is so entrenched that the board won’t or can’t rein them in.”
Let us not forget how firms like Goldman Sachs have been vocal about their own take on Bitcoin. In 2017, the company said it is much too volatile to be considered a store of value.
They believed Bitcoin wallets were vulnerable to hacking and that precious metals are “still the best long-term store of value.”
For centuries, gold has been trusted. By the words of Fox Business:
Gold is considered a safe haven because it has acted as a store of value, maintaining its purchasing power for thousands of years. The reality is that over the long term, the price of gold remains constant while the price of everything else goes up.
The cryptocurrency market, on the other hand, historically and more recently, has been easily moved by tweets from Elon Musk which results in hundreds of millions added or removed from its market cap in a matter of hours.
Recently, as Bitcoin has declined close to 51%, gold has increased nearly 6% in the past 30 days alone.
Goldman Sachs has noted, “The use of precious metals is not a historical accident…”
“Gold wins out over cryptocurrencies in a majority of the key characteristics of money.”