- Bitcoin outperforms gold amid COVID-19
- Bitcoin is up 23% YTD (year-to-date)
- Gold is up 12.3% YTD (year-to-date)
Bitcoin is often known as the “digital gold” by crypto enthusiasts. Thus, gold has been a hot topic of discussion since the cryptocurrency’s inception in 2009. With global markets and commodities falling at an unprecedented rate amid COVID-19, many have flocked to safe-haven assets as a hedge against volatility.
While Bitcoin is commonly referred to as “digital gold”, gold and Bitcoin are not alike. Like other financial assets, Bitcoin has seen immense volatility thus far in 2020 due to the nature of cryptocurrencies. Unlike physical metals like gold, cryptocurrencies are not backed by physical assets. Thus, prices are far more volatile.
Despite the volatility, Bitcoin has outperformed gold by almost double since the beginning of this year. The popular cryptocurrency reached a high of $10,400 on February 13th and has since corrected to $8900.
Bitcoin’s stellar gains are attributable to the upcoming Bitcoin halving. The halving will reduce the block reward from 12.5 BTC to 6.25 BTC. As a result, the current Bitcoin inflation rate will decrease from over 3% to 1.8%.
With many investors speculating on Bitcoin’s price prior to the halving, volatility continues to remain high as Bitcoin pushes an upward trend.
Similarly, gold is performing well in 2020. The popular metal is up 12.5% since January. Like Bitcoin, the precious metal has also been very volatile amid COVID-19. Gold spiked to $1,700/oz in early March while dropping to $1,500 by mid-march and finally recovering back above $1,700/oz.
Alternative Assets Amid COVID-19
As the economy enters a global slowdown, many investors have looked towards alternative assets amid COVID-19. While both assets crashed following WHO declaring COVID-19 a pandemic, Bitcoin has performed far better than gold.
Back in April, energy commodities like oil fell to unprecedented prices. On April 20th, oil futures have reached an intraday low of -$37.
With no end in sight, many investors are reverting to low volatility safe-haven assets.
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