For decades, sophisticated investors have used gold as a hedge against potential market downturns and inflation. Gold has no credit or default risk. It has intrinsic value because of its fairly limited supply.

Having gold in your investment portfolio protects against significant losses in the event of a market downturn or rising inflation rates. Today, investors have added cryptocurrency, more specifically bitcoin, to the list of assets used to protect investments.

I suggest comparing the use of gold and bitcoin as a hedge against a market downturn or rising inflation. Bitcoin is similar to the precious metal as a viable investment protection tool. The amount of bitcoin in circulation, like gold, is quite limited, with only 21 million coins available.

Most Bitcoin is traded in pairs with the dollar. If the U.S. currency goes down, without BTC going down, the digital coin’s quote goes up.

Bitcoin has succeeded very well for several reasons, but one of them is the threat of inflation. This is a unique topic because 9% annual inflation over five to ten years can cut the real value of money in half. The fear of high inflation, not to mention hyperinflation, is growing.

The first refuge from inflation during the global economic recovery was bitcoin, not gold. For technically savvy and savvy investors, it is the digital coin that looks more comfortable and flexible than other alternative assets.

This has made gold the second most attractive asset for investors. Indeed, who needs a safe but low-yielding haven for money when you can invest it in a revolutionary asset whose quotation is skyrocketing?

In addition, there was a drop in demand for gold due to the sale of jewelry during the active spread of the coronavirus. Many companies were selling off gold due to the financial difficulties caused by the pandemic.

The current rate of recovery of the global economy will certainly lead to a resumption of the jewelry trade, so demand for gold will experience a strong recovery.

 

And bitcoin has proven to be a great haven for investment only when it is on the upswing. When the digital currency crashes, it becomes the worst haven in the world. The proposed chart shows how high a cryptocurrency quote can go, but also how quickly it can fall.

 

gold praph

This is exactly the position bitcoin is in. It has been falling since April. Faced with this decline, investors in haven assets are starting to get rid of bitcoin, naturally moving on to gold.

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