The competition between gold and bitcoin as the better inflation hedge continues to wax on. It has become even more prominent in light of the recent invasion of Ukraine by Russia which saw citizens of both countries race towards various assets to protect their wealth in these uncertain times. In all of this, some assets have proven to be the better option in times like these.
Gold Kicks Bitcoin Out Of The Running
For the past couple of years, bitcoin has consistently returned higher margins than gold. This quickly put the digital asset ahead of the physical one as the preferred method of hedging against inflation. Its ease of use and fast-rising popularity provided a stronger argument compared to the older gold and waning popularity. However, in times of great turmoil, only one of these assets stood up to the task.
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Last week, when the news of Russia invading Ukraine first broke, it sent a shock wave that was felt through all of the financial markets. Bitcoin and other digital assets were no exception as they had plummeted following the news. But gold, which has solidified its usefulness over hundreds of years, had provided the safe haven that investors needed at this time.
While all of the other assets and indexes crumbled, gold had soared. It was the complete opposite of what the other assets had been doing, gaining as high as other assets were losing. For that day alone, gold was the obvious winner.
Gold outperforms BTC on first day of Ukraine-Russia crisis | Source: Arcane Research
During this time, bitcoin’s volatility had shone through as the digital asset saw the worst of it. Compared to other assets and indexes, the price of bitcoin had plummeted further than any of them. While this happened, gold showed some of the clearest tendencies of behaving as a safe haven asset for investors. Its impressive Thursday rally is a testament to this.
A sharp recovery had occurred for all assets and indexes the following day which was Friday. This time around, bitcoin took the lead as gains piled up for the day. Gold had then recorded a downtrend that effectively erased all of its previous gains for the day.
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Nevertheless, gold still remains the asset of choice when storing value for the long term. Russia itself had been heavily accumulating gold for the last decade-and-a-half. The country has grown its reserves from 450 tonnes to 2,200 tonnes in this time period. This makes the short and long-term performance of the asset a potentially interesting one as governments impose sanctions on Russia, says Arcane Research.
Presently, gold has relinquished its claim to being the safe-haven asset as bitcoin and other indexes have recovered. Bitcoin, the S&P, and the UK 100 are all trading ahead of the asset as of Tuesday.
BTC trending higher | Source: BTCUSD on TradingView.com
Featured image from Forbes, charts from Arcane Research and TradingView.com