What happened?
In response to escalating geopolitical tensions and a strike in Qatar, gold has surged to a new all-time high while cryptocurrencies like Bitcoin have struggled. Bitcoin is currently valued at $113,744 but experienced a notable sell-off recently. In a 24-hour period, $370 million in leveraged positions were liquidated including $52 million in just one hour.
Who does this affect?
This market shift impacts investors diversifying their portfolios with cryptocurrencies. Increased geopolitical stress has caused traders to shift away from volatile tokens into safer investments like gold. Despite the long-term growth of cryptocurrencies, short-term shocks continue to make them a risky asset; leading to an increased preference for traditional hedges like gold among investors and institutions alike.
Why does this matter?
The swing towards traditional safe-havens like gold in the face of tumultuous global events demonstrates the continuing volatility and risk associated with digital currencies. As Bitcoin still struggles to establish a safe-haven status in times of crisis, it may continue to remain more correlated with equities than with traditional hedges. This trend could potentially impact the future policy and strategy of investment firms, financial institutions, and individual investors.