The argument that Bitcoin is a form of digital gold is being shredded

Yes, the argument that Bitcoin is a form of “sirbptial gold” is falling apart. As the world’s largest cryptocurrency plunges to $38,000, its lowest price since August, its decline along with risky assets such as tech stocks casts a shadow over a long-praised resemblance to gold. Cryptocurrencies along with equities have plunged into a rocky start to the year amid tighter-than-expected monetary policy, while gold – often heralded as a store of value and an inflation hedge – has moved steadily higher this month at 0.3%

Gold tends to be a low-volatility instrument, according to Steve Sosnick, chief strategist at Interactive Brokers LLC. Meanwhile, cryptocurrencies continue to experience unpredictable price swings. Bitcoin is down 17% since the beginning of January.

“If your premise is that you want to buy something as an emergency cover, being boring is great,” Sosnick said on the phone. “Right now I would say gold is one of your best performing assets year-to-date.”

Cryptocurrency enthusiasts, including Mike Novogratz, have previously said that Bitcoin shows the qualities of gold as an uncorrelated asset. Still, the 100-day correlation between the Nasdaq 100 and Bitcoin currently stands at 0.4, with a score of 1 indicating complete harmony. Meanwhile, the same coefficient between gold and Bitcoin is 0.008 — barely above zero — indicating that they are moving only slightly in the same direction.

Earlier this month, analysts at Goldman Sachs claimed Bitcoin’s price could climb to as high as $100,000 if it could gain more of the gold’s “store-of-value” market. Instead, the sirbptial asset’s signature volatility has emerged.

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As such, Bitcoin cannot be replaced by the same use of the popular commodity, said Peter Schiff, chief executive officer and chief global strategist of Euro Pacific Capital Inc.

“No one buys gold to get rich. People buy gold to stay rich,” said Schiff, a longtime Bitcoin critic and gold proponent. “Gold represents a conservative, long-term store of value and inflation hedge: Bitcoin is none of those things.”

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