Historical evidence for bitcoin performing like digital gold

Historical evidence for bitcoin performing like digital gold
03.04.2020 09:36 am

Historical evidence for bitcoin performing like digital gold

Bitcoins

In the recent crash, the independence of bitcoin relative to other assets has been challenged as it dropped by more than the S&P500 index. Many are tempted to conclude by saying the diversification argument does not hold anymore. The Research Department of SEBA Bank has a different opinion, based on an analysis of three examples of financial stress with a focus on gold. This precious metal is an asset revered as a classic diversifier and, like bitcoin, does not belong to the official monetary system.

BTC comparable to gold on the long run

During the financial crisis 2008, gold crashed 30%, in parallel with equities. But after three months, the correlation disappeared and gold served as a diversifier again. During the Black Monday crisis in 1987, the gold price went up in the beginning and then declined over several years while the opposite happened at the stock markets. An analysis of the dot-com bubble shows a high correlation during two to three months before gold and shares performed completely different for years. Being a classical diversifier on the long run does not necessarily mean anti-correlation during the first days of a crisis.

Bitcoin is now experiencing its first global crisis. During the general run on liquidity, bitcoin fell more than other markets which were supported by governments and central banks. After the sell-off, the correlation has declined. This behaviour is similar to what we have observed with gold and S&P 500 during the dot-com bubble burst.

“Does this mean that we know for certain that bitcoin is going to bounce regardless of what happens to other asset classes? Absolutely not. Only it is premature to conclude that diversification does not work. Bitcoin had been pronounced dead 380 times before the recent crash by prominent personalities. This will be bitcoin’s 381st death, and it will be resurrected for the 381st time”, says Yves Longchamp, Head Research of SEBA Bank.

High demand in stablecoins

Besides historical analysis of financial markets, cryptocurrencies are resisting the crisis. In 2020, stablecoins saw a steady rise of 20%, and during the recent sell-off, the demand for stablecoins has increased. Stablecoins are built on top of existing blockchains. The growing demand for stablecoins gives us confidence that space is, in fact, thriving.

Download the research publication here.
For more information on SEBA bank, please visit https://www.seba.swiss/

Related News

Huobi Futures to Launch Bitcoin Options on Sep 1st

Huobi Futures, the crypto derivatives market of Huobi Group, today announced... Read more »

Businesses choose Bitcoin payments as lockdowns lift

As businesses worldwide begin coming out of lockdown into uncharted territory, adapting and surviving the economic and social impacts of COVID-19 is imperative as consumer... Read more »

MVIS CryptoCompare Bitcoin Index licensed to VSFG/Arrano Capital Index to underlie Hong Kong´s first regulated Bitcoin Fund

MV Index Solutions GmbH (MVIS®) in partnership with CryptoCompare, the global leader in digital asset data, announced the licensing of the... Read more »

Retail investors set to sweep up diminishing supply of Bitcoin

A report on intentional holdings of Bitcoin published today by digital assets derivatives exchange ZUBR, shows that, if current investment trends continue, daily demand will... Read more »

CoinCorner comments on rumours around a possible new Bitcoin service by PayPal

Danny Scott, CEO at CoinCorner, commented:

“Rumours have been circulating that PayPal is rolling out a service that will allow its 325 million customers... Read more »

Buy Bitcoin little and often with CoinCorner’s new Auto Buy Bitcoin service

CoinCorner, a UK Bitcoin exchange, has launched a new auto buy Bitcoin service which gives customers the opportunity to make Bitcoin purchases on a regular,... Read more »

Magazine
ALL
Free Newsletter Sign-up
+44 (0) 208 819 32 53 +44 (0) 173 261 71 47
Download Our Mobile App
Financial It Youtube channel