Gold or Bitcoin: Is Bitcoin Dead or It’s Replacing Gold?

Bitcoin vs. Gold: An Overview

Alarms about an impending recession are frequently raised by analysts and economists. The COVID-19 recession, one of the shortest in history, came after the Great Recession of the 2000s a decade later. Recessions continue to occur, which has rekindled investors' interest in taking steps to ensure they lose as little as possible if one occurs.

Traditionally, as an investor, you would keep some of your money in precious metals like gold. This offers protection from the potential losses equities may incur during a deteriorating economic trend. This has been shown to work and is still working, but a fresh alternative is posing a threat to this tried-and-true capital preservation strategy. Due to its longevity and ability to garner support and notoriety, as well as the fact that it is exhibiting some patterns, bitcoin is proving to be an intriguing asset for investors.

Bitcoin

When Bitcoin first appeared in 2009, a new age in investment and finance had begun. These virtual currencies were first only appealing to a small group of specialized aficionados. Early Bitcoin investors realized in 2010 that the fractions of a cent they had previously paid for each Bitcoin had increased to $0.09 per Bitcoin. With the popularity of large-scale Bitcoin mining farms and pools comes the emergence of cryptocurrency exchanges.

In 2020, when the Covid-19 outbreak started to cripple economies all over the world, investors and speculators discovered that Bitcoin's value was not declining along with stock prices. They began investing money into it, institutional investors were trying to find methods to use it to make investment funds and instruments, and its price surged. Bitcoin is currently trading at just over $27,300, down 60% from its all-time high.

As the market retreated farther from the $30K price threshold, the crypto king had another dismal weekend. Since there is no longer the momentum that existed a few weeks ago, traders are perplexed as to why the price has stuck around the 30K price level, which isn't even a significant obstacle. Most people think that the Fed's recent switch to a more hawkish attitude on monetary policy, which has weakened the crypto king, is to blame for the current price decline. The 25K support level will be the major price point that everyone will be closely monitoring, and any lower than that will result in additional disappointment.

Gold

Due to its ability to keep its value through market declines, gold typically outperforms other asset classes. If a recession is on the horizon, investors will switch from equities to gold, driving up the price of gold. Due to this, it might be effective as a hedge against market declines or recessions—an investment that moves in the opposite direction of another.

Not all investors used Bitcoin during the Covid-19 epidemic; many adopted conventional techniques and switched to gold. Due to this, the price of gold soared from just under $1,300 in late 2019 to around $2,100 in mid-2020. Gold was trading a tad higher in international and domestic markets on April 25 morning around $1,997 as the market awaited clarity on the US Federal Reserve's interest-rate hike cycle.

The strength of the dollar index is the major factor behind why precious metals have started to lose their luster on the commodity market. According to CompareBroker's commodities analysis, demand has significantly decreased. The US GDP report this week may encourage some buyers to return to the market since traders may decide to protect their positions if the data indicates worse deterioration than anticipated.

For traders and investors alike, the $2,100 price mark will always be crucial. This is due to the expectation that the price will trade above this level and set a new record high. However, traders think that the precious metal may undergo a severe correction if the price trades below the price mark.

What are your thoughts on the correlation between Gold and Bitcoin? Seems like the two are on a swing-race before the central bank may pause its rate-hike cycle in June!

Disclaimer: The information provided is for general informational purposes only and should not be considered as professional investment advice.