Gold has been a store of value for thousands of years. In this connection, it has been widely used by investors as a hedge against the effects of recessions and inflation, which are often triggered by geopolitical tensions. In light of recent events such as the COVID-19 pandemic and the recent military crisis between Russia and Ukraine, many investors have looked at alternatives to gold and other precious metals as hedging alternatives. As we move into the digital age, it is important to prepare alternatives to gold for the future. In this quest for a challenger to challenge the dominance of gold, Bitcoin (BTC) has shone even clearer.
A rise in the gold price is usually an indicator of anxiety in traditional stock markets, with the current consensus among investors that gold is currently overbought. Gold prices reached $ 2,000 while investors weighed the geopolitical and economic consequences of the Russian-Ukrainian conflict.
On the other hand, over the same period, investment in bitcoin and other cryptocurrencies increased. Research firm Fundstrat said venture capital buyers pumped around $ 4 billion into the crypto space during the last three weeks of February 2022. A further $ 400 million was invested in crypto startups in the first week of March 2022. This increase in funding indicates that global investors are seeking more access to the space they believe can withstand the fallout from the Russian-Ukrainian conflict.
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During the constant conflict, both groups of the population suffer financially. Military activity on the territory of Ukraine led to the closure of many companies, which of course caused damage to the local economy. Russia has been hit by economic sanctions that have led to restrictions on bank accounts, loss of access to most forms of electronic payments, and a weakening of the local currency. Due to the decentralized nature of bitcoin, there are still no uniform international laws governing cryptocurrencies, which means that bitcoin retains its value regardless of where its holder is located. Bitcoin is legal in most countries, and some even declare it a legal currency.
The crises that led to the movement of people showed the potential effect of Bitcoin on the future. Bitcoin does not require the huge effort required to move gold. A person does not have to give up their bitcoins when crossing international borders and risks confiscation or theft associated with the transport of physical gold.
The potential benefit of Bitcoin in difficult times makes it more attractive to traditional investors. This attraction has also increased in part thanks to the recent decline in the value of Bitcoin. The biggest advantage of Bitcoin over other cryptocurrencies is its widespread use, having existed long enough to gain support and acceptance, and even showing some trends at the time.
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Stability in the face of crises
The global COVID-19 pandemic has proven to many that Bitcoin can withstand the fallout from the conflict between Ukraine and Russia. The pandemic has led to a global economic downturn in many traditional sectors. Coinbase reported $ 1.4 billion in fiats and cryptocurrencies in wallets when they were exchanged within 24 hours during the peak of the pandemic at that time in March 2020.
In the first half of March 2020, investors quickly noticed that Bitcoin managed to maintain its value while the traditional stock price collapsed around it. This increased the amount of capital invested in the cryptocurrency, eventually leading to an all-time high of around $ 60,000 in March 2021. The stability that Bitcoin has demonstrated during this particular crisis has only increased its appeal as a hedging alternative for those skeptical of the future of gold. . survival.
Despite the recent explosion in the cryptocurrency sector, cryptocurrency markets are still overshadowed by traditional valuation market investments. Given the widespread potential of bitcoin, we have seen this gap close faster than first thought. Investors have been looking for the latest and most viable options for their investment portfolios.
With Bitcoin’s advantages over gold and confidence in the digital future, many investors are looking to diversify their investment portfolios, and Bitcoin seems to be the better option. This gradual influx of capital into the cryptocurrency space can continue until the gates finally open to allow Bitcoin to take its place as the new gold.