Bitcoin’s price volatility is one of the key arguments used by critics against its use as a store of value, however, over the years, the price volatility has decreased significantly, so much so that institutions are using it as a treasury hedge asset. On the other hand, the traditional store of value Gold and Real Estate, once considered to be the best investment in financial uncertainty has seen a spike in their volatility in the past couple of years, as investors owing to financial uncertainties and fear of another 2008 like recession on many peoples mind.
Can Bitcoin Replace Gold as Safe Haven Asset?
It is quite ironic how the tables have turned owing to the economic uncertainty prevailing in the market that Bitcoin which only a couple of years back was looked down upon by banking giants who dismissed it as a bubble, and now many bankers and hedge fund managers are selling their gold holdings for bitcoin.
The last 3 years has seen Stocks, Gold and Real Estate getting more volatile. Volatility is a sign of economic uncertainty.
Meanwhile Bitcoin continues its trend of reducing volatility. pic.twitter.com/KtWSc7dOiS
— Willy Woo (@woonomic) January 28, 2021
The chart shown in the tweet might not give an exact picture of the traditional asset volatility but the price swings owing to the recent pandemic and crumbling financial sector for sure are by Bitcoin, only BTC offers high returns on the high risk, but the same can’t be said for Gold or government bonds.
Gold until now has remained the choice of investor big or small as an inflation hedge, however, the coronavirus outbreak seems to have made investors look for a new hedging class asset, and Bitcoin seems to be among the top choices. The bogus argument about no intrinsic value seems to be off the table now as investors realized the scarcity factor.
The price volatility would eventually reduce with time as has been the case up until now, and with institutional inflow just starting bitcoin would mature more as an asset class with time once bitcoin reaches its realized market price.