- The leading cryptocurrency has not functioned as a safe haven asset.
- Standard Chartered anticipates that the token will behave more like a tech stock in the near future.
Is Bitcoin truly digital gold?
Advocates such as Strategy’s Michael Saylor, BlackRock’s Larry Fink, and even former US President Donald Trump argue that Bitcoin’s scarcity makes it an excellent store of value.
However, this narrative has been called into question after Bitcoin dropped nearly 19% from its peak of $108,786, which was reached on the day of Trump’s inauguration, January 20.
Currently, Standard Chartered’s chief crypto analyst suggests that Bitcoin is not a safe haven asset — at least not for now.
“Bitcoin has a stronger correlation with the Nasdaq than with gold,” stated Geoff Kendrick, Standard Chartered’s global head of digital assets research, in a note released on Monday.
The Trump effect
Trump’s remarks regarding tariffs against countries such as Mexico and Canada initiated a decline in both stock and cryptocurrency markets.
Since Trump’s inauguration, the Nasdaq 100 has dropped nearly 7%, while the total cryptocurrency market has experienced a downturn of almost 20%. In contrast, gold is achieving record highs this month.
Clearly, cryptocurrencies have not fulfilled the digital gold proposition.
Nonetheless, Kendrick believes that investors may ultimately find Bitcoin useful as a hedge against issues in traditional finance.
He cited the collapse of Silicon Valley Bank as a pertinent example of such risk.
“These hedges serve different functions compared to gold, which protects against geopolitical tensions and long-term inflation concerns,” Kendrick noted.
He compared Bitcoin’s performance since December 2017 to that of the so-called Magnificent Seven — leading tech stocks like Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla.
Kendrick argued that if Bitcoin had replaced Tesla in the Magnificent Seven, this alternative set would have outperformed the actual group in five out of the last seven years.
Act like it
This is not the first occasion Bitcoin has been scrutinized for its volatile performance that mirrors higher-risk assets.
Market analysts suggest that now should be Bitcoin’s moment to justify its reputation.
“If Bitcoin is to be viewed as ‘digital gold,’ it needs to adopt that role. Otherwise, it will only reinforce the perception that it is merely a high beta asset,” asserted ETF Store President Nate Geraci on X on March 9.
During the March 2020 crash caused by the Covid pandemic, the asset plummeted over 50% in just two days.
Instead, Bitcoin has behaved more like a tech stock, as noted by Geraci and others.
Some believe Bitcoin still has time to mature into a safe haven asset.
“In my view, Bitcoin resembles gold in its teenage years,” commented Bloomberg Intelligence analyst Eric Balchunas in an interview with The Block in May 2024.
Andrew Flanagan is a markets correspondent for DL News. If you have a tip, please contact aflanagan@dlnews.com.
