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LONDON, ENGLAND – DECEMBER 07: A visual representation of the digital Cryptocurrency, Bitcoin on … [+] December 07, 2017 in London, England. Cryptocurrencies including Bitcoin, Ethereum, and Lightcoin have seen unprecedented growth in 2017, despite remaining extremely volatile. While digital currencies across the board have divided opinion between financial institutions, and now have a market cap of around 175 Billion USD, the crypto sector coninues to grow, as it continues to see wider mainstreem adoption. The price of one Bitcoin passed 15,000 USD across many exchanges today taking it higher than previous all time highs. (Photo by Dan Kitwood/Getty Images)
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In the heat of the crisis over Russia invading Ukraine this week, gold stood out as the go-to safe-haven asset.
Bitcoin did not.
“The crypto world’s hopes for assets like bitcoin to achieve digital gold status have evaporated as speculators headed for the exits as the crisis in Ukraine has deepened,” states a recent report from UK-base brokerage Hargreaves Lansdown.
In other words, the idea that bitcoin is a replacement for gold as an asset that can help hedge against geopolitical risk is suspect at best.
From February 22, when Russia’s government authorized the invasion of Ukraine, until February 24, the price of gold rallied three percent to a high of $1,973 a troy ounce.
(To date, February 24 has been the height of the crisis. It was when it was clear that Russia had invaded the entire country and not just the already-controlled breakaway areas in the Donbas. It’s also the date that the U.S. said American troops wouldn’t be fighting Russians, indicating that the matter may not escalate as much as some fear.)
While gold rallied bitcoin prices dropped falling from approximately $36,600 on February 22 to around $34,600 two days later.
On Friday both assets reversed their respective rallies and falls as a sanguine attitude has been adopted in the market.
Nevertheless, while investors were anxious solid gold performed as a safe-haven, as did the SPDR Gold Trust (GLD) exchange-traded fund which holds bars of solid bullion.
“Gold has a well-established record as a hedge against risk,” says Juan Carlos Artigas, head of research at industry group World Gold Council. “The uncertainty comes in form of high inflation and in the form unexpected events.”
It’s that latter case that the world experienced earlier in the week. And yes, gold did rise to the occasion, while bitcoin flopped.
What happens next remains to be seen.
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