While there’s no doubt that the impact of coronavirus has been primarily reflected by human suffering and the loss of life, it’s socio-economic effects are also worthy of consideration.
From an economic and financial perspective, however, there can be no doubt that coronavirus has also piqued the interest of investors and presented brand new opportunities to achieve a viable profit.
Aside from targeting devalued, mid-cap stock options, investors have also been drawn to the increasingly popular option of Bitcoin. But why is this the case, and is this asset really the new digital gold?
Understanding Gold and its Value
Gold is well-established as the world’s favourite safe haven asset, thanks to its predictable nature and ability to provide a secure store of tangible wealth during times of economic austerity.
Currently priced at a healthy £1,472.49, the price of gold has followed a typically predictable path since the outbreak of coronavirus as a global pandemic.
More specifically, it started March 16th priced at a conservative £1,223.28, only to embark on a steep upward trend after the WHO confirmed Covid-19 as a global pandemic. This also precipitated a global stock market crash, causing the price of gold to quickly break the £1,300 barrier and hit £1,357.22 by March 25th.
It has since continued to embark on a largely upward and bullish trend, first breaking the £1,400 barrier on April 23rd. Although it has fluctuated during the second and third quarters as the economic climate has eased, gold remains enduring popular amongst investors and even peaked at an impressive £1,574.37 as recently as August 7th.
As the financial market and wider economic climate remains uncertain, it should come as no surprise that the value of gold has continued to rise this year.
In fact, some experts have asked whether gold could break the £2,000 barrier at some point in 2020, although it appears that the window of opportunity for this to occur has recently passed.
The Correlation Between Gold and Bitcoin
Interestingly, 2020 has also seen Bitcoin more closely tied to the value of gold than ever before, with this emerging as a veritable safe haven amongst investors.
Of course, Bitcoin has already emerged as a viable accompaniment for forex traders, while the fact that it remains largely impervious to macroeconomic factors has afforded it unique appeal and value in the current climate.
It’s also largely averse to risk and exposure in traditional marketplaces, and the 60-day correlation between the two assets is continuing to hover at record highs above 0.5 according to Coin Metrics data.
This positive correlation has been particularly prevalent since the beginning of July, as the US dollar (which has also traditionally served as a safe haven asset) has slumped against a number of major currencies through Q3 and the beginning of Q4.
Ultimately, the wide-scale sell-off of the greenback is boding well for scarce and finite assets like Bitcoin and gold, as these interests continue to align and provide sanctuary for investors during austere times.
The Last Word
Ultimately, these trends highlight how Bitcon has continued to evolve and emerge in the financial markets, particularly as traditional asset classes have been undermined by the coronavirus outbreak.
They’ve also enabled Bitcoin to build on its incredibly appealing attributes, including security, anonymity and the lack of authorised control (which increases the risk of market manipulation over time).
This is a fascinating trend for investors to follow, and one that’s likely to continue indefinitely in the near-term and beyond.