Bitcoin's slump in the invasion of Ukraine undermines the status as digital gold

Bitcoin's slump in the invasion of Ukraine undermines the status as digital gold

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When Russian troops flocked across the border to Ukraine this morning, Bitcoin's price crashed. Meanwhile, gold rose sharply, although it reduced its profits in the USA until the early afternoon.

The sharp divergence that reflects movements in view of other current messages, such as: B. the potential for rising interest rates has shown that Bitcoin has a stronger correlation with stocks such as technology shares than with gold or other safe ports.

Safe ports have always been considered security against market turbulence or currency devaluations. One of the biggest sales arguments of Bitcoin supporters is that it could be even better protection against inflation or market uncertainty than gold. But how and why?

arguments for Bitcoin as a digital gold

The theory behind it that Bitcoin is the digital version of gold is based on its offer and disinflationary nature. Those who help to operate the Bitcoin network are rewarded with Bitcoin for their services, and the amount of Bitcoin they deserve is halved every four years. This means that the rate with which new bitcoins get into circulation is steadily decreasing until these rewards are used up, so that a total of only 21 million bitcoins remain that will ever exist.

Bitcoin advocate argue that gold is not demonstrably finally-it could even be dismantled of asteroids in the future - and it is less divisible to falsify more easily, more difficult to transport and take it easier.

Although we cannot be sure that humanity will reduce gold or other precious metals from asteroids in the future, it is true that Bitcoin is more divisible, easier to transport, more difficult to confiscate and probably more difficult to fake than gold - although this is mainly due to its intangible and digital nature.

The performance of Bitcoin as a safe port

While Bitcoin began to fall, gold has increased in the middle of the market turbulence, which caused many to reject Bitcoin's narrative as a gold set and safe harbor.

When 2022 began and reports on the inflation showed record -breaking climbs, Bitcoin's narrative weakened as a safe haven. Bitcoin continued while gold maintained his course.

Bitcoin continued when it became known that Russia increased its presence on the Ukrainian border. The record -breaking inflation and the geopolitical tensions in Eastern Europe fit exactly into the narrative, which should protect safe ports against. Although Bitcoin was advertised as one of these assets, perhaps even the best of everyone, he offered no protection.

Why doesn't Bitcoin behave like gold?

Since more and more investors have included Bitcoin in their portfolios, psychology around the asset seems to have shifted from a libertarian, censor resistant inflation protection to a purely speculative technology game.

Although it was always a speculative system, its correlation with more risky technology shares and ETFs has recently become far stronger than its correlation with safe ports.

Many pronounced Bitcoin supporters still argue that the cryptocurrency should offer protection against inflation and social unrest due to its properties such as scarcity and censor resistance. Nevertheless, Bitcoin looks less and less as a safe harbor.