Bullion dealers report soaring gold sales as cryptocurrencies plummet, pointing at a contrary relationship between the two assets.
Spooked by the recent cryptocurrency market crash, which led to a 40% drop in the price of Bitcoin and caused the market to lose more than $300 billion of its market cap over a few weeks, investors seeking stability have turned to gold.
After a stellar start to December last year, which saw it breaking through an all-time high of $20,000, Bitcoin (famously referred to as digital gold) plunged below $10,000 this month – a prime example of the digital asset’s notorious volatility. The wild fluctuations and sudden drops in price have pushed investors toward more stable assets – namely, gold.
Bloomberg reports that European online bullion dealer CoinInvest saw a 5x increase in the sale of gold coins after Bitcoin crashed.
“Yesterday was a hell of a crazy day. Emails and phones did not stand still with customers asking how they could turn their crypto into gold,” said Director Daniel Marburger, adding that they sold close to 30 kilograms of gold as Bitcoin dropped on Tuesday this week.
GoldCore Ltd. observed a similar pattern, with Director Mark O’Byrne noting that clients have been switching from cryptocurrencies to gold during the past three months, unsettled by the sudden price surges in the crypto market.
“They told us they were concerned that the massive price appreciation was unsustainable and they got nervous about it,” O’Byrne said via email. “We think increasingly people are realizing that these digital assets have much higher risk levels than the traditional safe haven asset.”
Since gold has been traditionally seen as one of the most secure investments, it is not surprising that profits from the volatile crypto market are transferred to gold as investors seek stability and attempt to hedge their risks. A report published by Goldman Sachs last year in October reasoned that gold is a more superior investment as compared to Bitcoin.
However, when the crypto market is in a boom, the rate of return can be staggering, and investors tend to move money out of less profitable investments and ride the wave. Last year, during a bullish phase in the crypto market, analysts observed that cryptocurrencies were eating into the gold market.
Current and past trends suggest that there is an inverse co-relation between cryptocurrencies and the gold market – when cryptocurrencies do well, gold sales drop, and when Bitcoin and its peers plummet, the demand for gold increases.
Read more at:
https://cryptovest.com/news/crypto-market-crash-forces-investors-to-seek-refuge-in-gold/
