Author Topic: Gold And Bitcoin Heading Lower  (Read 4 times)

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Gold And Bitcoin Heading Lower
« on: July 01, 2020, 03:17:53 AM »
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Forex trading is quite risky. Most brokers’’ website pages have the first thing on the page as the risk disclosure. An investor should only put money with the knowledge of what they are signing up for. on the likelihood of losing money.

Most traders are looking for secure assets as alternatives to the unassured markets.

For a long time, gold has been a to-go asset when looking for security. Most of the traders realized it is immune to the constant changes in the other money markets.

It remains in stable supply even when the money markets go down, thus acting as the best money source, until the advent of Bitcoin after the 2008 economic crisis.

With the economy reduced to its lowest, most investors realized the need for a currency devoid of the shaky markets. It also had to be free from the central authorities' regulations that determine the supply and inflation.

These needs led to the creation of Bitcoin. The crypto had been fronted as the digital gold. Like gold, it would be free from fluctuations in the traditional markets.

However, the current market trends give a different narrative, far from the ideal. Ever since the traditional markets started declining due to the effects of the Coronavirus, both gold and Bitcoin have been on a similar path.

Such patterns have opened up the markets to the fact that Bitcoin and gold are correlated.

The Rise of Stablecoins
Although the majority of traders thought that Bitcoin is a haven, some think Stable coins are the real deal. Stablecoins are the crypto coins whose value is tied to a fiat currency like the US dollar.

Unlike Bitcoin, which is susceptible to volatility, the Stablecoins are more grounded. They only shift with the changes in the dollar. Such stability has made them a hit among the traditional money markets.

They also act as a bridge between the crypto exchanges and the traditional money markets.

Given that stablecoins offer faster and secure transactions and fiat currency's stability, it becomes the best alternative when looking for an assured investment.

Most of the traders are opting to trade out Bitcoin and gold in favour of one of the leading Stablecoins, Tether. The down spiral period saw the rise of BTC/TETHER trading more than BTC/USD.

How Bitcoin and Gold Correlates with Other Stocks
Other than gold, Bitcoin has proven to be correlated with other stocks. One of the most popular assets associated with Bitcoin is S&P500.

Regarded as one of the indicators of the traditional stock market, all the S&P500 assets have always been topping BTC. It had stayed with a correlation of below – 0.1 against Bitcoin.

Over the years, the meteoric rise of Bitcoin has led to it gaining ground over the S&P 500 to reach the current correlations of 0.16. In perspective, gold has also, for a long time, negatively correlated with the S&P 500.

However, the ratios have been improving in recent years.

By reacting to the other assets the same way, gold and Bitcoin are showing even more correlation.

The Case for Stability of Bitcoin and Gold
No matter how much Bitcoin seems to be equal to gold, there is always the stability variation.

The pro-gold faction who believe that it is the only stable asset tends to site the volatility of Bitcoin as the reason it cannot be trusted. Most of them think that gold has proved over the years that traders can rely on it. 

Bitcoin, on the other, is known for the high volatility. This year alone, the coin has traded at some of the lowest while also getting to the highest. There is always the possibility of a change in value even within seconds.

The future also looks uncertain for the coin. While some spectators predict a bright future, others believe it can still decline. Both are a possibility, given the constant changes.

A Backup for the Traditional Money Markets
Another correlation that Bitcoin and gold share is their role in the traditional exchange. Given that the two have proven their safety, they are the haven for the traders. Most traders consider them security for when the typical security exchange goes down.

Bitcoins and gold act as the best source of money due to the ease of sale. Unlike the highly regulated economic market, Bitcoin is easy to trade with the fiat currency and other commodities.

That is to say, investing in Bitcoin and gold is the sure return in investment, most traders look for.

Bottom Line
The conversation on Bitcoin’s capacity as the digital gold has been on for some time. So far, the way both the assets react to changes in the economy and with other commodities shows a correlation. However, the volatility of Bitcoin is a challenge.

Bitcoin still has some way to prove over and over again that it can match gold's prowess. 

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