Wild price fluctuations and increased regulatory reviews prove to be a bad time for Bitcoin. Wild price fluctuations above 30% on a daily basis and the likelihood of more critical regulatory review mean that allegations of Bitcoin rivaling gold as a store of value are bullish.
Bitcoin and gold
Bitcoin’s potential to be a better portfolio protection than gold was bolstered by its performance over the past year. Throughout 2020 and most of this year, it outpaced other assets. However, events that took place last week, such as Elon Musk’s criticism of Bitcoin’s energy expenditure and China’s reiteration of its tough stance on crypto, saw Bitcoin drop 40% from its record high of over $ 63,000 and discouraged its most ardent fans. Earlier this week, JP Morgan Chase reported that large institutional investors are dumping Bitcoin in favor of gold. They based their findings on open position data on Bitcoin futures contracts from the Chicago Mercantile Exchange. However, the bank estimated that Bitcoin is on track to reach $ 140,000 in the long term. “This week’s crypto decline and recovery was a wake-up call,” Edward Moya, a senior market analyst at the Oanda Corp trading platform, told Bloomberg. The others reiterated their feelings. Societe Generale analysts Alain Bokobza and Arthur Van Slooten said in a note Thursday, “It’s not surprising that the location of Bitcoin in any investment portfolio remains highly controversial, certainly due to volatile price movements.
BTC as digital gold
Proponents of the digital gold theory claimed that Bitcoin shares basic properties with gold. Often they point to a limited supply. But Bitcoin’s decline this week means its 60-day noticeable volatility is now much higher than gold and is rising. An example of this happened on Wednesday: Bitcoin dropped 31% before recovering and ending the day close to the price it started. Meanwhile, gold has seen weekly gains for three consecutive weeks, and analysts say it is benefiting even from the crumbling cryptocurrency market. However, since the beginning of 2021, while gold’s spot prices have fallen by over 1%, Bitcoin is still high around 38% in a similar period despite its recent declines. In 2020, governments injected record levels of liquidity into economies to limit the economic damage caused by the COVID pandemic.