With the cryptocurrency market currently experiencing a historic high, investors are trooping in from almost every corner looking to get a piece of it. However, a gold enthusiast believes that the asset should still be part of crypto investors’ portfolios.
Balancing Crypto’s Volatility with ‘Safe’ Gold
Speaking with Bloomberg yesterday, Sandeep Biswas, the managing director of Australia-based gold exploration firm Newcrest Mining, explained that crypto investors would do themselves a lot of good by keeping some gold in their portfolios.
The gold bug explained that while the crypto market is incredibly vibrant, high volatility means things could turn on its head real quick. When that happens, gold could help investors as a safe-haven asset.
Biswas explained that while gold hasn’t had the same meteoric rise as Bitcoin, its fundamentals remain strong as several investors rushed to it amid the coronavirus as well. So, crypto investors wouldn’t precisely be losing if they purchase more of it instead.
With a less volatile nature and possibly more tangible functionality, gold can be the safer option to crypto investors worried about the latter class’s price swings.
The gold bug isn’t exactly wrong. Earlier this year, the crypto market got a fresh dose of Bitcoin’s volatility after it crashed towards $27,000 after hitting an all-time high of $42,000. The entire crash happened within a few days, and while the leading cryptocurrency has bounced back and even hit another all-time high, there are always risks of a seismic crash.
Crypto Outlook is Positive
A recent report from top exchange Kraken showed that January was an especially volatile month for Bitcoin. Per the publication, the leading cryptocurrency witnessed an annualized volatility of over 100 percent – a phenomenon last seen in March 2020, following the infamous “Black Thursday” incident.
Still, even Kraken is optimistic about gold’s long-term price trajectory.
“Given that Feb., on average, returns six percentage points more than Kan. and is 15 percentage points less volatile, one might expect Feb. to outperform Jan. and volatility to dwindle as BTC melts up,” the report explained.
While Biswas is concerned about crypto’s performance, not many share his sentiment. Last month, Anthony Scaramuci, a New York hedge fund manager whose company recently launched a Bitcoin fund, said in an opinion piece that Bitcoin is now just as safe as gold and government bonds for investors.
As Scaramucci and fellow Skyridge Capital executive Brett Messing explained, Bitcoin has seen tremendous growth over the years. Beyond the price surges, however, the leading cryptocurrency has matured, with governments and authorities stepping in to address some of its risks. As such, investors should feel more confident about getting a piece of it.