Corona Crisis: Are Bitcoin and Gold a Safe Haven?

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Countries and major central banks have stepped up measures to defend their economies against the corona epidemic that has infected over 215,000 people worldwide. Some of the unexpected outcomes of the COVID-19 pandemic combined with oil price wars and the resulting financial crisis was the notion that Bitcoin and other cryptocurrencies are safe bets similar to gold or other commodities. In a way gold and other precious metals were viewed as safe havens at the time of crisis.

It does seem nothing is a safe bet against the widespread corona crisis. The crypto market witnessed one of the worst weeks in history, with a one day decrease in bitcoin price (from $8,100 to $4,100 low) of nearly 50 percent. As of now Bitcoin is trending around $5,000. Global risks from the pandemic corona-virus and liquidity crisis has triggered major bitcoin sell offs and other cryptocurrencies.

Source: Coinmarketcap

Gold had developed likewise, especially in terms of overall numbers. According to Moneymetals, gold has started trading on the year at just over $1,500 per oz later topped at just under $1,700 at the beginning of last week, and has been tanking ever since. Like Bitcoin, gold recently reached a high of $1,700 the highest value since the last recession. but later the crash of the stock market set the gold rally down at a low of almost a year to $1,450. According to Lundingold as of now it is trending around $1,489.

The macro conditions appeared to be the ideal scenario for safe haven properties. This now seems as if the safe-haven value of gold is in doubt too. While its own late decline is nothing like Bitcoin, in terms of percentage loss, if you look at how much capital has poured out from each market, the collapse of gold dwarfs that of the cryptocurrency.

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Senior market analyst at OANDA, Jeffrey Halley said to CNBC “This is just a continuing trend of gold positions being liquidated as equity markets collapse. There is a trend towards holding cash in the market and that’s being reflected in gold”.

The losses on the gold market are currently five times the size of the Bitcoin market as a whole. Right now market capitalization of Bitcoin is around 94 Billion US dollars. When contrasted with gold and other financial markets, the statistics bring into perspective how tiny Bitcoin is.

Comparatively Bitcoin has some features that compare favorably with gold, it remains far too volatile for many people with low risk tolerances who seek to protect their wealth above all else. Seems like liquidity or cash is the only safe bet right now. 



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