Could Cryptocurrency Equal Gold as a Safe Haven Investment?

Bitcoin is having a moment. Forbes reports that the digital currency has hit $7,000, its highest this year after a slightly disappointing 2018 run. This upsurge comes hot on the heels of a huge security and theft scandal, which underlines the currency’s current reputation for being extremely volatile. Analysts, however, are seeing this rise in price as a huge improvement, with investors seeing Bitcoin in a favorable light once more. In fact, some even believe that digital currencies like Bitcoin can serve as a safe haven investment like gold in the near future. 

Can digital currencies really become a safe haven?

 The safest answer is maybe, with some experts believing that cryptocurrencies might one day equal gold as a safe haven investment, while others disagree. Venture capitalist Peter Thiel told CNBC that the cryptocurrency Bitcoin can potentially be a gold-like safe haven, largely on account of its size. “There will be one online equivalent to gold,” Thiel proposes confidently, “and the one you’d bet on would be the biggest.” He goes on to explain that gold’s value lies in the fact there’s no asset like it, its value coming from the fact that there are no other alternatives. Although Bitcoin is not the only digital currency available, it is the dominant cryptocurrency by far, accounting for 42% of total market capitalization. The PayPal founder also believes that digital currencies — Bitcoin, in particular — will become a store of value rather than an alternative currency because Bitcoin is too cumbersome. He then likens Bitcoin to gold, pointing out that it is “like bars of gold in a vault that never move, and it’s a sort of hedge of sorts against the whole world falling apart.” Bitcoin’s ascendancy, though, may not be absolute, with Theil himself recognizing that other digital currencies may eventually end up overtaking Bitcoin. 

However, there seems to be a far greater chance of the opposite happening; meaning, cryptocurrencies won’t equal gold as a safe haven investment. Equity analyst Kristoffer Inton argues against Thiel’s views and makes it clear that Bitcoin won’t make a dent in gold’s market share. Inton, who hails from the highly regarded Morningstar Research Services, says that this is because “40% of gold demand relates to investment, so a shift in investment from gold to cryptocurrency would be a seismic shock.” 

Gold’s hegemony is likely to remain unchallenged, at least for now. And, as if on cue, the price of gold looks well on its way to recovering from its sustained dip last year. Regardless of the recent dip, FXCM outlines how gold is one of the best investments you can make, and its perceived stability is seen as a big advantage. Gold remains a feature in many investment portfolios worldwide, as investors continue to trade gold as a way to protect themselves from any uncertainty caused by other markets. 

But even if cryptocurrencies don’t equal gold as a safe haven investment, big things are still in store for the digital currency. The recent news about Bitcoin’s price increase has led to an influx of individuals wanting to trade and invest in the digital currency. Cryptoverse previously outlined five types of trading styles best suited to cryptocurrency, with the techniques varying from short- to long-term. Scalping, for example, is a very short-term technique that relies on selling stocks quickly in order to avoid a price dip. Position trading, in contrast, can take months: this technique relies on studying long-term market trends and cryptocurrency trends before making an investment. 

All in all, these trading techniques are likely to expand as cryptocurrency gains traction. Although its future as a gold-like standard for investment may be unclear, its impressive rise as both a store of value and an alternative currency means that it’s best to start investing in it today.