Bitcoin Experiences its First Maket Crisis- Is It Digital Gold, or Something Else?
Bitcoin has experienced its first ever financial crisis. As gold soared to over $1,700 and proved its counter indication to the market, Bitcoin sank 10% along with the altcoin market. Is Bitcoin a digital safe haven? Is it a digital gold? Or did bad timing lead to a Bitcoin dip.
Why did Bitcoin fall as oil prices dumped 20% and the DJIA fell 7%? As gold soared and its volatility spiked, Bitcoin fell 10%. What happened? The famous Chinese ponzi scheme, PlusToken, dumped over $100 million in Bitcoin on Monday, which correlated with the market dump. Take into account that traditional investors likely dumped Bitcoin for cash to capitalize on the sinking markets. Gold rose as interest rates were cut and the FED hinted at further stimulus action along with rate cuts.
The Dow Jones Industrial Average (DJIA) dumped as traders reacted violently to the coronavirus threat to world supply chains and the Russia/Saudi oil war intensified. Bitcoin followed oil lower, and there was a moment when investors questioned the safety of Bitcoin during market downturns. Bitcoin is extremely volatile, and has proven this as it rose 40% in the first two months of the year, then plunged 38%, and finally dropped an additional 10%. Bitcoin has not proven itself to be a safe-haven asset by this measure.
Is Bitcoin digital gold and a safe haven asset for investors? Like gold, Bitcoin is traded on exchanges 24/7 and is volatile. Bitcoin has yet to be tested in a prolonged financial crisis, and the PlusToken Bitcoin dump provided the noise that messed up our first real test. I believe that Bitcoin is an alternative asset that has and will continue to outperform the stock markets of the world. Its adoption and growth are bearing testament to increasing investor trust. We will need to wait for the next system shock to see if it truly is the fabled digital gold.
Gold has a history of 5,000 years as a store of value and real wealth. Like Bitcoin, it has a finite quantity and is deflationary. Going forward, we will see if Bitcoin becomes digital gold. Remember that Bitcoin has 11-years of history vs gold's 5,000 years as a stable value asset.
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Originally published in my Publish0x account I own at:
Also published in my Steemit account I own at cryptoedify and my weku account at wstanley225.
Picture from Pixabay.