With The US Recession Scare, Will Bitcoin Or Gold Become The Best Safe Haven Asset?
There has been much talk among groups that Bitcoin, and cryptocurrencies like it, are the future of the world. Even so, as the last two days heralded a possible US recession, investors are turning a blind eye to cryptocurrency and focusing on the thing that always glitters: Gold.
Last Tuesday, the US Institute of Supply Management released a statement that their manufacturing index had dropped to an all-new 10-year low. With a reading of 47.8%, last month, it’s fallen from 49.1 in August. Anything below 50% indicates a contraction in manufacturing, so this doesn’t bode well at all for the US.
Holger Zschaepitz, a popular analyst, has released a tweet describing the US’s risk of recession to be above 40%. However, the yield curves indicate a staggering odds of 60%, but stocks and corporate bonds don’t show any increased risk.
As the recession scare works its way through the financial world, it’s dragging global equities down. The Dow Jones Industrial Average took a big hit from this, dropping more than 450 points in day two of a sell-off.
Gold vs BTC
As is usual for big recession scares like this, gold’s price climbed rather happily from $1 460 to a nice, even $1 500 per ounce within the last 48 hours. The historically precious metal will doubtlessly be eternally considered a haven asset, and now is no exception. As recession concerns rise and groups decide to avert risk, gold will be many’s go-to for financial security.
Bitcoin hasn’t enjoyed this level of success, however. While gold prices rise, Bitcoin remains trapped in a range of $8 200 and $8 500 since Tuesday. Bitcoin’s bounce from its $7 700 low has run out of steam within the 200 day moving average resistance of $8 483 within the last 48 hours.
Many voices have toted the argument that Bitcoin was the new, digital form of gold. While true that many investors consider BTC as a means of hedging against aggressive central bank policies, it doesn’t seem to have skyrocketed like the price of gold.
In fact, bids are in a bit of a dry spell. When the European Central Bank decided to cut rates by ten basis points back in September, the cryptocurrency fell from $10 000 to $8 000 per BTC.
Whether it be only its nature, or the public as a whole not yet willing to accept this new format of haven assets, BTC has lost this round to gold. Perhaps next time there’s a significant need for haven assets, people will turn more to Bitcoin. Bitcoin exhibits the ability to act like one, having no direct link to any government and is deflationary by design. This gives Bitcoin an inherent “value” like gold has.
As an interesting footnote, Lego's also exhibit haven asset behavior. If investors are too keen on using physical, tangible assets, they may turn to plastic before being forced to go Crypto.