Cryptocurrencies are no alternative to gold

While financial market experts largely agree that both gold and digital currencies definitely have a right to exist in every investor’s portfolio, doubts are growing with regard to the claim that cryptocurrencies, repeatedly referred to as Gold 2.0, are an alternative to gold. The most recent example: the start of the Russian invasion of Ukraine, when gold and the most common digital currencies reacted very differently.

Safe haven: gold in euro reached all-time high at start of war

On 24 February 2022, demand for gold surged, resulting in the highest US dollar price per ounce since September 2020. At the same time, gold recorded an all-time high of 1,767 € per ounce. Xetra-Gold surpassed its previous record high of early August 2020, trading at 55.41 € per gram at the start of the war, alongside a sharp decline for most stock indices worldwide. Gold, thus, reliably lived up to its role as a portfolio stabiliser and safe haven – as during countless geopolitical or capital market crises before.

Bitcoin and Ethereum perform like high-tech stocks

Analogous to the stock markets, the largest cryptocurrencies dropped significantly in light of the escalating geopolitical crisis situation: Bitcoin by 8 per cent within one day, Ethereum by 12 per cent. In the meantime, most cryptocurrencies have somewhat recovered – also in line with the stock markets. According to a recent dpa report, analysts are increasingly noting that digital currencies move in accordance with the rest of the capital markets, which would eliminate them as a safe haven in times of crisis. Due to their high volatility, they are recommended as high-yield for risk-seeking investors, but they bear more unrest than stability for a portfolio. Another uncertainty factor for cryptocurrencies lies in the efforts of many countries to regulate cryptos or even ban them in some cases, as a recent EU paper envisages for cryptocurrencies with a particularly large ecological footprint, according to a report by BTC Echo.