The benefits of owning Bitcoin over gold have been discussed countless times. These two digital assets, one being a physical asset and the other called “digital gold”, have come face to face when it comes to which one is the best store of value. When the Bitcoin crash erupted last week, the debate flared up again about the benefits of owning a relatively stable asset like gold versus a volatile one like bitcoin.
Gold provides cover
Over the past week, the price of bitcoin has fallen by more than 30%. This led to a red sea in the market as the rest of the cryptocurrencies followed suit. During this time, the value of bitcoin has fallen significantly since the beginning of the year. As a result, the digital asset, which had outperformed its physical counterpart for a long time, fell behind it again.
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Even though gold yields are declining year-on-year, they remain positive while bitcoin yields are declining. As of Tuesday, gold is up 0.6% year-to-date, putting it in green territory. As for bitcoin, the cryptocurrency is now down a whopping 55% since the start of the year.
The volatility of bitcoin is causing concern among participants in the traditional financial market. However, it has also been one of the biggest draws for those who have invested in the asset. It surged over 50% last year to an all-time high of $69,000 before dropping over the next six months to a low of $17,600.
BTC price trading below $21,000 | Source: BTCUSD on TradingView.com
While the sell-offs rocked bitcoin, gold hasn’t been that bad. So when it comes to the debate over which of these digital assets serves as the best hedge against inflation, gold has now outpaced cryptocurrencies.
Is Bitcoin falling?
Bitcoin’s recovery streak has been encouraging over the past couple of days. After hitting a low in the $17,000 territory, the recovery has since been solid, with a few dips here and there. Along with this, there was a recovery above the 5-day moving average for the first time in the last week.
Despite this, selling pressure remains high and new selloffs are shaking the market. However, support is starting to form above $18,000.
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There are also implications for the price of a digital asset to fall below the previous cycle high for the first time. This confirmed the theory that the digital asset did not hit the bottom of the bear market. Combined with the fact that Bitcoin has previously dropped at least 80% in all of its previous markets, the bottom is likely to hit around $13,000.
In addition, the bottom is expected to occur about 15 months after the previous halving, which means a bottom sometime in Q4 2022.
Bitcoin is trading at $21,313 at the time of this writing. It is up 1.93% in the last 24 hours with a market capitalization of $405.8 billion.
Featured image from Kinesis Money, chart from TradingView.com
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