The coronavirus pandemic has caused global economic and financial turmoil on a scale not seen since the Second World War. Prolonged lockdowns, mass unemployment and disrupted international trade caused stock markets to crash and dire forecasts for the future.
It will take years for the full impact of Covid-19 to be realised, with UN secretary-general Antonio Guterres warning in April that it would trigger a recession “that probably has no parallel in the recent past.”
Yet amid all the chaos, certain “safe-haven assets” have bucked market trends to reach new yearly highs in recent days.
Since mid-March, when the first wave of lockdowns began around the world, the price of gold has risen by nearly a third. In that same time period, bitcoin has nearly trebled in value and continues to climb.
During times of global economic certainty, investors typically look to secure their holdings in gold, silver and other non-volatile assets.
Bitcoin may have been created in response to the 2007/8 Financial Crisis, but its price volatility has made it a notoriously risky investment.
Its recent price gains have led some to suggest that bitcoin has moved from a speculative asset to a safe-haven asset, with some even describing it as “digital gold”.
The cryptocurrency’s finite supply – no more than 21 million bitcoins will ever exist – and lack of ties to any country or institution has helped fortify these parallels with gold and may be why investors are increasingly seeing it as an effective store of value.
Since starting the year trading at around $7,000, bitcoin saw steady gains before mirroring global markets in March by crashing to below $5,000.
In the following five months, bitcoin's gains have outstripped any other major asset and risen four-times faster than the Dow Jones Industrial Average.
“Bitcoin is currently realising its reputation as a form of digital gold," Nigel Green, CEO of finance firm deVere Group, told The Independent.
"Up to now, gold has been known as the ultimate safe-haven asset, but bitcoin – which shares its key characteristics of being a store of value and scarcity – could potentially knock gold from its long-held position in the future as the world becomes ever-more tech-driven."
