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Is Bitcoin Finally Joining Gold As A Safe Haven Asset?
Bitcoin may be joining gold as a safe haven asset - which is just what BlackRock wants.
Over the last month, conventional markets like the S&P 500 have corrected, as the strong dollar attracts traders seeking risk-free returns. Gold and bitcoin—assets which are usually sensitive to dollar strength—have resisted this trend, instead displaying impressive gains. What's going on?
Gold: A Safe Haven
Gold generally comes under pressure when the dollar is strong, because it does not pay a dividend or any revenues, and therefore traders tend to sell it when they can make a better low-risk income by buying bonds or collecting interest.
When times are tough, though, gold is still a key safe haven assets. Recent geopolitical risk may have strengthened the case for gold, which recently pushed above $2,000/oz and looks set to close in on its all-time high of $2,081 in May this year.
Gold has notable outperformed stocks in recent weeks, despite both being influenced by interest rate decisions.
While there's some correlation with the S&P (a rally into the new year, a correction at the end of Q1), it's pretty noisy—and it breaks down later in the year, when gold puts in a five-month correction but stocks perform well.
Any correlation has come thoroughly unstuck over the past month, when the S&P dropped due to unexpected dollar strength, but gold pushed higher despite it.
Dividing the price of the S&P index by the price of gold shows the correlation (or lack of it) better: Stocks gained against gold in May and June, chopped sideways for a few months, and then plummeted as the S&P dropped at the same time that gold soared.
It's odd that gold has put in such a strong performance while the dollar is pushing a local high. However, these are turbulent times, and gold is the traditional safe haven asset. And, as we recently noted, gold is showing strong technicals, with multiple challenges of resistance close to the all-time high since 2020.
What About Bitcoin?
Throughout Bitcoin's history, community members have attempted to position it as "digital gold": A global asset that stands outside of the control of any nation state, and which, like gold, has fixed supply and a low annual increase in available supply.
However (also like gold), bitcoin has proven to be highly volatile, as well as sensitive to interest rate decisions. The 2022 crypto bear market was catalyzed by the Fed's decision to end the era of easy money and begin a series of aggressive rate hikes.
Bitcoin's performance during October suggests that it may finally be achieving a status as a mainstream alternative asset, and potentially even a safe haven asset. One month isn't remotely long enough to come to any firm conclusions, but it's noteworthy that gold and BTC have both ignored the dollar strength that has undermined the S&P, instead pushing to local highs.
"Flight To Quality"
This is, of course, exactly the narrative that Larry Fink and BlackRock (among others) have been pushing. Following the fake announcement that an ETF had been approved, BlackRock CEO Fink commented that it was a "flight to quality" that reflected pent-up demand for crypto, and that bitcoin might soon serve a similar role to gold and US treasuries for investors concerned about risk.
Gold achieved its safe haven status organically, over the course of centuries and millennia. Bitcoin could do the same in less than 20 years, aided by a marketing campaign from the world's largest asset manager.
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