Stocks have encountered some notable volatility lately, with the benchmark S&P 500 Index suffering a correction last month and experiencing further weakness in March.
The major stock indices – specifically the S&P 500 and the Dow Jones Industrial Average – have not fallen in to a bear market yet.
However, any such decline could potentially cause investors to panic, driving them to safe-haven assets like Bitcoin and gold.
[Ed. note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Turmoil For Stocks
The stock market has had a rough ride lately. The Dow Jones Industrial Average (DJIA), for example, fell more than 700 points today after President Donald Trump announced tariffs on Chinese goods, according to Bloomberg.
The S&P 500 once again fell into negative territory for 2018, after recovering from the correction it suffered in the last few months, Google Finance data reveals.
Thus far, these indices have suffered modest volatility.
However, should these benchmark groups of stocks fall in to a full-fledged bear market, investors could panic, flocking to the perceived safety of assets such as gold and Bitcoin.
Bitcoin’s Potential Tailwinds
Bitcoin will likely benefit if stocks suffer a “major pullback,” stated Tim Enneking, managing director of Crypto Asset Management.
Many market observers are closely watching the relationship between the stock market and Bitcoin, noted Mati Greenspan, senior market analyst for social trading platform eToro.
“So far we haven’t seen any flows from the stocks into Bitcoin,” he stated, emphasizing that many traders do not believe that the recent declines in stocks constitute a bear market.”
He emphasized that “For now most of the selling has been from institutional investors and bots.”
Greenspan predicted that if a crisis does materialize, “It’s the retail investors that you’d likely see moving to digital assets.”
‘Too Early To Tell’
Analyst Travis Parker offered a differing point of view, stating that “It’s a little early to tell how cryptocurrency will respond to a market correction.”
Cryptocurrency “certainly has some of the advantages of precious metals,” said Parker, COO of IRA Bitcoin LLC. “It is a non-correlated asset that should be resistant to market volatility and may even benefit from a sentiment-based shift to alternative assets,” he stated.
“However a severe market downturn will put pressure on all highly appreciated assets as investors seek to offset market losses with cryptocurrency gains.”
Gold’s Potential Gains
Should stocks push lower, gold could certainly benefit, noted analysts.
Not only is the precious metal a more effective safe-haven asset than bonds, but it is also a “non-correlated asset,” said Ron Smith, director of trading at GSI Exchange.
Greenspan offered similar input, stating that “Gold should act as a good indicator of safe haven sentiment.”
“If things do get ugly we could see it spike,” he added.
Gold may have a few other advantages over bitcoin, emphasized Oliver Isaacs, blockchain investor and advisor.
Bitcoin is relatively new, having existed for less than a decade.
In contrast, “gold has 10,000 years of monetary history behind it, and is universally accepted,” Isaacs noted.
Further, gold benefits from a wide range of hedging products, for example options and futures, he stated.
Finally, he emphasized that gold is “the go-to standard to hedge against potential downside.”
Read more at:
https://www.forbes.com/sites/cbovaird/2018/03/22/could-bitcoin-and-gold-benefit-from-weakness-in-the-stock-market/#6debeb26612c
