Since the beginning of 2022, gold has outperformed the world's largest cryptocurrency as a safe-haven asset. And tensions between Russia and Ukraine are pushing investors towards gold rather than bitcoin.
After Russian President Vladimir Putin recognized two republics in the east of Ukraine and ordered the introduction of troops there, the cryptocurrency market again experienced a sell-off.
Markets now await the potential sanctions by Western leaders against Russia. Germany has already announced the suspension of the certification process for the Nord Stream 2 gas pipeline project from Russia.
According to Commerzbank analyst Daniel Briesemann, the Biden administration already planned additional sanctions on Russia yesterday.
Since the beginning of the year, bitcoin has fallen by almost 18%, while gold has risen by almost 4%. This is a departure from the familiar trading pattern of last year, when gold was stuck in a tight range and Bitcoin surged to an all-time high of $69,000 in November. Since hitting this high, Bitcoin has fallen 45%.
It is also interesting to compare the price of Bitcoin against gold, which has fallen to its lowest level in seven months. One bitcoin can now only buy 19.9 ounces of gold. That ratio peaked at 37 ounces back in October.
Geopolitical uncertainty and concerns about inflation have reinforced the case for the precious metal as a safe-haven asset. And Bitcoin, which many call gold 2.0, almost exactly mirrors the behavior of the U.S. stock market because investors are looking for safety elsewhere.
Looking at gold versus bitcoin, the current situation favors gold. There is a possibility that bitcoin will return to 30,000 and then fall below this level. And gold can reach a new historical high.
According to many crypto experts, a major rally is not expected in the cryptocurrency market until 2024.
Crypto exchange Huobi's co-founder Du Jun told CNBC this week that the next bull market in Bitcoin will come only in two years when the next "halving" occurs. According to him, bulls can be expected in the cryptocurrency market only by 2025.
Bitcoin's finite supply and the halving process are what make massive price surges possible. Bitcoin halving happens every four years, and it is when the reward for mining Bitcoin transactions gets halved, which also cuts the rate at which new Bitcoins enter circulation. The last Bitcoin halving was in May 2020.
For gold, analysts are projecting more gains above the $1,900 an ounce if the situation in Ukraine continues to escalate.
New record highs are also not being ruled out for gold. TheTechnicalTraders.com chief market strategist Chris Vermeulen told Kitco News that gold is looking to reach $2,700 an ounce in one year and then rise to $7,400 in five years.
