Is Bitcoin the new gold?

Bitcoin's role as the new gold—a safe bet for investors—continues to continue.

At the end of last year, a correlation appeared between gold prices and cryptocurrency, as investors began to sell gold for bitcoin. Analysts expect the trend to continue despite the recent decline in cryptocurrency prices.

Thomson Reuters analysts noted in a study published in January 2017 that the rise in cryptocurrency prices in December led to a significant shift of capital away from precious metals. The report says that individual investors can't resist cryptocurrencies.

Christopher Lowney, a strategist at RBC Capital Markets, notes that he has noticed a potential correlation between the price of gold and the price of cryptocurrencies. This trend, Lowney notes, began in late 2017 and continued into early 2018, indicating that as the price of bitcoin quadrupled, investors could potentially start selling off gold to buy the cryptocurrency.

Loney stressed that the correlation is small—not enough to push gold prices down, and not enough for bitcoin to replace gold. Macroeconomic factors that traditionally influence the price of gold continue to dominate the market.

Loney also expects gold prices to end the year lower than at the beginning of the year, around $1,303 on average for the year.

Volatility aside, Bitcoin is still a relatively unknown asset compared to other investments. Gold, by comparison, is favored by institutional investors and has greater liquidity. While bitcoin trading volumes have recently been just over $3 billion per day, gold trading volumes have reached $250 billion per day, according to the World Gold Council.

Bitcoin's correlation with gold will increase over time, Lowney said. But the opposite can also happen, causing bitcoin investors to sell the cryptocurrency in difficult times to buy gold as a less volatile asset.

According to https://www.ccn.com