Investors looking for hedging alternatives choose bitcoin as the preferred digital asset given it’s advantages over gold.
For millennia, gold has served as the store of value for the world’s wealth. Due to this longevity, investors have seen gold as a low risk asset to be used as a hedge against turbulent economic times. With recent global crisis’ such as the COVID19 pandemic and the war in Ukraine, investors have increasingly looked for alternatives that provide secure hedging options. As digitisation continues to dominate, alternatives to gold must be future proof. Bitcoin has stood out as the strongest contender to challenge gold.
The recent spike in the price of gold is indicative of the current fear in traditional equity markets due to the conflict in Ukraine and the economic ramifications. There is a widely held belief that gold is now overbought.
In the same period there has been a significant increase in capital funding for Bitcoin. Venture capitalists have invested over $3 million into the crypto currency industry in February. The increased funding is an indicator that investors are seeking more exposure to crypto, believing that it will withstand any economic consequences of the war.
The war has hit both sides economically, forcing many Ukrainian businesses to close and economic sanctions on Russia crashing the price of the Ruble. Bitcoin on the other hand is completely decentralised and is not yet subject to any international regulations to govern it. Bitcoin maintains it’s value regardless of the location of the holder.
Bitcoin is also incredibly easy to transport in comparison to physical gold. This makes it extremely beneficial when individuals have been displaced and find themselves as refugees in other countries. Bitcoin can easily be accessed and does not have to be declared at customs as physical gold does. There is also a great reduction in the chances of theft or confiscation than with physical gold.
The potential of Bitcoin to have a strong utility in times of need, as shown in the current conflict, has increased the attractiveness of the digital asset to investors. Bitcoin has also had a recent drop in value, leading to investors seeing it as somewhat underbought. Bitcoin has achieved mainstream awareness and is one of the oldest digital assets available, leading to it being seen as a lower risk investment.
Bitcoin is looking like the best option for investors to gain exposure to crypto market given the inevitability of a digitised future. Combined with the advantages Bitcoin has over gold, it seems like an inevitability that the floodgates of investment will open and Bitcoin will become the new gold.