In recent years, cryptocurrencies such as Bitcoin have become extremely popular, especially when Bitcoin nearly touched $20,000 in 2017. Bitcoin is expected to see very big jumps again this year after a battered 2019.
Nexo co-founder Antoni Trenchev recently predicted that Bitcoin would hit $50,000 in 2020. Shortly after Bitpay Chief Commercial Officer Sonny Singh said that the digital currency would hit $20,000 this year. It was Singh who correctly predicted that Bitcoin would get close to $15,000 in 2019.
“This year, I’m going to make a prediction,” Singh told Bloomberg’s Taylor Riggs in January. “I think Bitcoin passes the all-time high and goes past $20,000 this year.”
Venture capitalist Lou Kerner also believes that the value of Bitcoin and cryptocurrency will continue increasing and speaking to Bloomberg, he said that the next few decades will bring about extreme growth for Bitcoin as well as other cryptocurrencies
So, with bitcoin expected to soar again, will this affect gold prices? Many experts believe that Bitcoin will never truly impact gold’s price and its position as a hedge.
Cryptocurrencies offer an easy-to-use, digital alternative to fiat currencies. While the concept of bitcoin has been called “digital gold” it is still as new as ever while gold has been around for centuries as an investment.
Both gold and Bitcoin have often displayed a notable correlation during times of economic crisis but this changes when markets return to normalcy. ARK Invest’s Chris Burniske analyzed the relationship between the two and found that on a weekly basis, the one-year rolling correlation of bitcoin and gold’s returns was positive for nearly the entire period between 30th December, 2011, and 20th June, 2014.
Tim Enneking, chairman of cryptocurrency investment manager EAM said to CoinDesk, “There is actually very little correlation when you factor out geopolitical events that drove prices for everything up or down.” He added that to gain meaningful insight into the relationship between bitcoin and gold requires looking into market correlation.”
“When overall market correlation is high, so is the correlation for this pair, at least recently,” he explained. “When overall correlation is low, so is the correlation between these two.”
Petar Zivkovkski, the director of operations for bitcoin trading platform Whaleclub said his firm has yet to detect any “significant statistical correlation” between the two. Zivkovkski remarked, “Any direct or inverse correlation over a set period of time is, in our opinion, purely coincidental.”
Zivkovski has also said that the bitcoin market is “tiny” in comparison to the gold market, and that “the demand needed to drive gold prices” is much greater than needed to boost bitcoin.
Algorithmic trader Jacob Eliosoff told CoinDesk, “If a major institution adopts bitcoin, this will affect the digital currency’s price. However, there is little reason to believe this development will impact gold prices.”