Bitcoin's Correlation With Gold Is Near an All-Time High. Does That Make Bitcoin a Buy?
Yahoo Finance ·
Diversification is important to consider, particularly at a time when Wall Street's leading figures are warning investors about risk. For example, Jamie Dimon, the CEO of JPMorgan Chase ( JPM -0.32% ) , recently suggested that "risks are shifting below the surface like tectonic plates" that could "cause meaningful disruptions when they shift or collide." Investors have been bidding up the price of gold as they look for a safe-haven asset just in case there's a Wall Street earthquake on the way. Bitcoin 's ( BTC -1.64% ) correlation with gold is near all-time highs. That has some suggesting that Bitcoin could be a gold alternative. Be careful of viewing this cryptocurrency as a diversification tool on par with gold. The main reason investors buy gold when they are worried about the economy and stock market is that it is a physical asset with a long history as a store of wealth. It is also used in jewelry and other industrial applications due to its conductivity and malleability. But the big story is that, if the world economic order comes to an abrupt end, history suggests you can use gold as currency. Bitcoin is a digital asset. Its value is determined by what its holders are willing to pay. It is pitched as a currency, but it's not easily used for that purpose for most consumers. It is also pitched as a store of wealth, but its history is very short, and its value has been shockingly volatile. Most notably, if the power goes out, you can't access your Bitcoin.
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