Market Meltdown Prompts Investors to Ditch ‘Digital Gold’ for the Real Thing

If bitcoin is “digital gold,” investors seem to prefer the real-world variety.

So far this year, the price of the precious metal has climbed about 22% while the cryptocurrency has fallen about 10%. So if it’s not digital gold, what is bitcoin exactly?

Gold Rush

True to its history, gold has been treated like a safe-haven asset as investors flee the sagging stock market and weakening US dollar, climbing to and holding at about $3,200 per ounce. Bitcoin, on the other hand, came into the year riding higher than ever with the arrival of a more pro-crypto administration and the rise of ETFs tracking its price; between October and the end of January, the price of bitcoin soared a remarkable 70% to burst through the $100,000 threshold. As tariffs came and went (and came and went), however, investors treated bitcoin like a riskier asset, sending its price sliding back toward $80,000 heading into April while gold continued its steady climb.

But since “Liberation Day,” bitcoin has experienced a turnaround, climbing 7% from Monday through Friday last week. Bitcoin true believers tend to think that gold leads, and bitcoin follows. Others say, not quite: 

• According to a new report from Franklin Templeton titled “When Gold Zigged, Bitcoin Moonwalked,” the digital asset still has more in common with tech equities than gold. In fact, bitcoin held just a 0.3 correlation with gold over rolling 90-day windows, compared to a 0.7 correlation with the Nasdaq stock index.
• In layman’s terms, that means bitcoin tracks much closer to the Nasdaq than to gold. And last week, it undershot broader equities markets: The tech-heavy Nasdaq composite rose nearly 12%, while the S&P 500 rose 8%.

Makes You Fink: In his annual letter to investors earlier this month, BlackRock CEO Larry Fink warned that ballooning government debt could eventually cause the dollar to lose its world reserve currency status, with bitcoin possibly swooping in. “Decentralized finance is an extraordinary innovation. It makes markets faster, cheaper, and more transparent,” he said, before adding a huge caveat: “That same innovation could undermine America’s economic advantage if investors begin seeing bitcoin as a safer bet than the dollar.” This year, interest payments on US government debt will reach $952 billion, or more than is spent on defense.