For decades Gold has established itself as the defacto market hedge. Gold prices usually have an inverse relationship with the equity markets as well as the US Dollar. Could we now be witnessing a shift from Gold to Bitcoin?
An opinion piece in Forbes has a theory that the recent climb in the price of Bitcoin was not related to the upcoming ETF review or the more favorable regulatory environment. The move is attributed to an exodus of Chinese investors that were fleeing the recent drop in the Yuan. If this is true, it is interesting that the asset of choice would be Bitcoin since it is banned along with other cryptocurrencies in mainland China. It is also interesting since in China Gold speculation is extremely popular with Chinese investors.
What would attribute the change for Chinese investors to prefer moving into Bitcoin instead of Gold? Speed could be one reason, the recent drop in the Yuan has been swift and sudden making investors scramble for an alternative. Another reason for the switch is that Chinese investors might see greater upside with Bitcoin versus Gold. Gold prices have been in a range between $1050 to $1350 an ounce for the past four years. We are all familiar with Bitcoin meteoric rise over the past several years. Much of the surge was attributed to Chinese investors.
Some analysts point out the fact that since Bitcoin has a fixed supply, it is an ideal instrument for hedging. The recent trade war sparked by the US might look to offer Bitcoin as a haven from market and currency volatility. If these theories and analysts are correct, it could mean an enormous upside for Bitcoin. If Bitcoin would replace 25% of today’s gold market, it would roughly translate to a price of $136,190. Source (https://blog.sfox.com/bitcoin-at-136-000-can-it-become-the-new-gold-standard-ee98b11aacfc)
A move like this would solidify Bitcoin as the asset class of the future, and the new go-to hedge of choice for investors.