The Potential Irony Of Bitcoin Replacing Gold As Safe-Haven Asset
(Kitco News) - There's an old market adage that says when the general public catches wind of a big market move occurring, that move is likely nearing its final stages before reversing its price trend. The Bitcoin publicity craze currently playing out in the world marketplace certainly fits into that old market saying.
There is also ongoing speculation among market watchers on the recent price pressure in the gold and silver markets being due in part to the keener trader/investment interest in Bitcoin as a safe-haven asset or store of value.
Most veteran market participants would question whether any investment asset whose price has been so volatile could be considered a stable, long-term investment vehicle. That being duly noted, no one can deny the skyrocketing interest in and value of Bitcoin. Reports today said the total value of Bitcoin now exceeds the total value of most of the world's largest individual investment banks.
Whether bitcoin can ultimately compete with such historical safe-haven stores of value like hard assets, including the precious metals, remains to be determined--but not in the coming days, weeks, or months; rather in the coming decades.
Ironically, the recent extreme daily volatility and skyrocketing value of Bitcoin could wind up working in favor of the gold market bulls. Here's a scenario that is within the realm of markets reality: The spike in bitcoin prices continues for a while longer, with more and more novice investors pouring their money into a seemingly sure bet. The total value of bitcoin owned by the world's investors is becoming big enough to rattle other markets when the bottom finally does fall out of bitcoin--or even if the cryptocurrency just sees a sizable downside correction, which is certainly overdue at present.
If and when such a scenario occurs, guess where the scared money is going to flock? It won't be into other cryptocurrencies, but most likely into the safe-haven metal that's been a de facto currency for much of humankind: gold