In these weeks of economic instability since the Russian war began, the world’s stock markets are in the red and the purchase of gold has increased, as people seek to protect the value of their money. However, there is something to keep in mind when carrying out this tactic so as not to be surprised. Gold is not as stable in value as is believed.
Gold has constant price volatility, just like gold. bitcoin (BTC), although currently at lower levels. That means that, if you buy it, when you want to sell it later, its price may be lower and you will lose some money. This risk is run mainly if you want to sell in the short term. Although that same volatility also allows it to be revalued and allows profits to be made, as is also the case with cryptocurrency.
For example, in the second week of March, the price of gold spiked to almost $2,070 (a figure not reached since September 2020). And then it pulled back slightly to the $1,984 line, according to records from TradingView. Finally, in the total period, despite the ups and downs, it grew by 0.43%, just like bitcoin.
Historically gold has always been volatile
Gold is considered an ancient safe haven asset that has been used for 21 centuries. “Safe haven assets” are understood as those investments that are capable of maintaining stability or even increasing their value in times of uncertaintyeconomic weakness, financial crises, devaluation of the national currency or increased risk in the market.
It is for this reason that its purchase in the world has increased since Russia started the war in Ukraine. As was the case at the beginning of 2020, when its use was also increased as a safeguard of value in the face of the global economic crisis that unleashed the covid-19 pandemic. However, gold has not always been a safe investment to protect the value of money.
The price volatility that gold has had throughout history has meant that it does not always function as a store of value.. As the following graph shows MacroTrends which compiles its records since 1915, the ounce of gold reached its maximum value in 1980 for USD 2,450.
Its price then progressively fell to $423 in March 2001, at which point it started to appreciate until reaching $2,284 in August 2011. From there it fell back to $1,268 in November 2015 and has been rising ever since. This behavior shows that the price of gold usually decreases and grows for long periods of several years.
Bitcoin is not so volatile now
Bitcoin, unlike gold, has a price volatility that is higher on a day-to-day basis and usually has upward and downward movements in short periods of a few months.. Although over time, since his birth only thirteen years ago in 2009, he has managed to lower his level of abrupt price fluctuations.
Proof of this is that from September 2020 to April 2021 it had a high fluctuation that it has not had again. In that period it went from USD 10,784 to USD 62,800. It then pulled back to July when it bottomed out at half that value. And it recovered in four months achieving its all-time high in November 2021 for USD 67,600.
Since then, its value has been falling to what appears to be its current support line, given that it has managed to raise its lows in recent weeks. This is a sign that could mean a price increase soon or at least a revaluation of the asset. Its volatility index in the last two months was 3.96%, according to buybitcoinworldwide.
According to the CriptoNoticias calculator, at this time a bitcoin is worth USD 38,446, while an ounce of gold is quoted at USD 1,991. A strikingly huge difference considering that the cryptocurrency was born only thirteen years ago compared to the millennial asset that has been traded for more than 21 centuries.
This data demonstrates that gold isn’t always stable, that bitcoin isn’t constantly aggressively volatile, that the cryptocurrency has gained value drastically faster and steadily than the age-old asset.
All safe haven assets are volatile
Its high growth in a short time, limited capacity and anti-confiscation power of the government have caused bitcoin to be classified as “digital gold”. Something that could accentuate your purchase if the war and the economic collapse continue, as well as investment in gold and other haven assets, such as silver, oil, gas, rice and soybeans.
Although it is important to clarify that These safe haven assets, also called “commodities” or raw materials, have had price volatility throughout their history. Not all equally, since some have been more valued than others depending on the context, as you can see some examples in the following graph of DataMacro.
Among the commodities, gold has been one of the most stable to protect money, as seen in the green line of the graph. We will have to see if bitcoin manages to infiltrate these traditional refuge assets to protect the value of money. A concept that could be taken if one considers that, after all, they are all volatile and have managed to appreciate in value over time. A series of characteristics that Satoshi Nakamoto’s cryptocurrency meets
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