The advantages of holding Bitcoin over gold have been publicized and debated countless times. The two digital assets, a physical asset and a so-called “digital gold,” have both gone head-to-head when it comes to which is the better store of value. As last week’s Bitcoin crash erupted, discussions began again about the advantages of holding relatively stable assets such as gold over more volatile assets such as Bitcoin.
Gold provides protection
Bitcoin prices have fallen more than 30% in the past week. This led to a red sea in the market as other cryptocurrencies followed suit. During this period, Bitcoin’s year-to-date value has dropped significantly. This leaves digital assets, which have outperformed physical assets for quite some time, falling behind again.
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While gold’s year-over-year returns have declined, it remains positive, while bitcoin’s returns have fallen into the red. Gold was up 0.6% year to date as of Tuesday, in green territory. As for Bitcoin, the cryptocurrency is down 55% so far this year.
Bitcoin’s volatility has always been a cause for concern for those in traditional financial markets. However, it is also one of the biggest draws for those investing in the asset. It rose more than 50% last year to an all-time high of $69,000 before falling to a low of $17,600 over the next six months.
BTC price trading below $21,000 | Source: BTCUSD on TradingView.com
While the sell-off rocked Bitcoin, gold was not so unfortunate. So when it comes to which of these digital assets is a better hedge against inflation, gold is now ahead of cryptocurrencies.
Bitcoin’s recovery momentum has been encouraging over the past few days. After hitting lows in the $17,000 region, the recovery has been steady since then, with occasional dips. What followed was a rally above the 5-day moving average for the first time last week.
Still, selling pressure remains high and more selling is rocking the market. However, support started to form above $18,000.
The price of the digital asset also fell below the previous cycle high for the first time, which also means. It leads the school to believe that the digital asset has not yet reached a bear market bottom. Combined with the fact that Bitcoin has lost at least 80% in all its previous markets, the bottom could be around $13,000.
Furthermore, the bottom is expected to occur about 15 months after the last halving, which will be sometime in Q4 2022.
At the time of writing, Bitcoin is trading at $21,313. It has gained 1.93% in the past 24 hours and has a market cap of $405.8 billion.
Featured image from Kinesis Money, chart from TradingView.com
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