The Great Asset Debate
Bitcoin’s classification has been a hot potato in the financial world, with everyone from crypto enthusiasts to regulators tossing it around with varying opinions. Is it a currency? A commodity? A fancy investment? Or is it just a glorified digital sticker? This week, as U.S.-Iran tensions flared up, Bitcoin was running parallel to gold—a true hero looking to steal the shine from its traditional counterpart.
The Price is Right?
Looking at Bitcoin and gold price trajectories offers an intriguing picture. From April 2013 to present, gold hit highs in 2020 while Bitcoin saw its highest value in late 2017. Analyzing their correlation over the entire sample, we discover a respectable 46.5%. Gold and Bitcoin seem to be having one of those relationships where they’re occasionally very close, yet not quite fully committed—a classic ‘it’s complicated’.
Recent Fling: Are They Trying to One-Up Each Other?
Fast forward to last week—gold surged to $1,606 per ounce (no pressure, gold). Not to be outdone, Bitcoin sped past $8,300, flexing its highest price since 2019. The competition is on! But wait a minute, while Bitcoin shows price action often correlated to gold, its correlation with gold returns doesn’t seem to have the same chemistry, hovering around a mere 2.2%.
Oil’s Involvement: A Stinky Situation
Enter oil, slinking in the background like an unwanted guest at a party. High volatility and fixed supply create a tricky equation when it comes to comparing oil to Bitcoin. WTI prices and Bitcoin’s relationship? A negative 13.5%. Ouch! Talk about an awkward interaction! Investors looking for insight might find that oil doesn’t predict Bitcoin’s actions in any coherent way.
The Long-Term Relationship Status
What’s the final verdict in the long-term? When viewing cumulative returns from April 2013 until Christmas 2019, Bitcoin has delivered returns that leave gold and oil eating its digital dust—almost 9 million percent gains, if you can believe it! But this raises the pressing question: Is Bitcoin truly the safe haven asset it’s being marked as? As Bitcoin dances away from traditional markets during unstable times, some might consider it a crucial addition to diversified portfolios. Time will tell if Bitcoin becomes the refined ‘commodity’ everyone thinks it is or perhaps something entirely novel.
