From the beginning of 2013 to the end of 2022, the price of an ounce of gold increased by only 8%. Since then, the price has risen 175% (as of January 30). Clearly something is going on with the shiny precious metal. And investors are taking notice.
bitcoin (CRYPT: BTC)The world’s first and most valuable cryptocurrency, it is often considered a digital version of gold and has been an impressive asset historically. Its price has risen a surprising 22,770% in the last decade. However, it has been losing the race against gold in the last 12 and 24 month periods. And the cryptocurrency is down 33% below its peak.
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Should Bitcoin Investors Be Worried Right Now?
Investment professionals argue that gold is a safe haven asset and should be added to portfolios in times of extreme uncertainty because it is not correlated with others. asset classesIt has a short supply and is neutral. Last year provided gold with the perfect backdrop to support its monster performance.
This White House administration has certainly turned things around when it comes to trade and geopolitical tension, especially with ongoing changes in tariffs, relations with China, and the recent dispute with European leaders over Greenland.
It also doesn’t help that the United States continues to run massive trade deficits, has a record $39 trillion federal debt load, just starting. quantitative easingand could resume interest rate cuts under a new Federal Reserve chair. This weakens confidence in the US dollar, which is at a four-year low against a basket of major currencies.
Central banks around the world want to reduce their dependence on the United States, which is why they have been buying gold. The gold they own is now worth more than their US Treasury balances.
One thing is obvious from Bitcoin’s recent performance, which is lagging behind that of gold: the leading cryptocurrency is still considered a risk asset. This tells me that it still has a long way to go to become a more accepted store of value.
But it makes sense. Bitcoin’s rise was initially driven by retail investors. Institutions and large buyers came on the scene much later. For the dominant digital asset to move to the next level, it will eventually have to win over central banks around the world, which have substantial purchasing power. This will take time.
This may be discouraging for Bitcoin bulls, but investors should not pick up on the signs of short-term trends. I think Bitcoin still has tremendous advantagegiven that it is scarcer than gold and is purely digital. And now it’s a great opportunity to buy the dip