Bitcoin seemed to gain significant ground in 2021, with many analysts and investors thinking that it could replace gold as a safe storage of wealth and inflation hedge. The end of 2021 and the start of 2022 have been a sharp reminder that crypto is an inherently volatile asset and shouldn’t be used as a safe haven.
“There is a bearish divergence between where we are right now and the previous peak and this is suggesting we will see a failure below,” Michael Moor of Moor Analytics said to Kitco. “If prices start to break significantly below 37,000, then Bitcoin will be in more in trouble. It’s probably going to head back down towards, 28,000 or lower.”
Gold has gone through its own woes, navigating hawkish Fed statements and numerous stalls despite the record inflation. However, there’s evidence starting to emerge that gold’s long consolidation period might be ending. Moor sees it as being on the cusp of testing new record highs above $2,000/oz. “If I can push to my initial resistance level, then I would look for a decent penetration above that,” Moor said. “Ultimately, I think with a breakout, we could see a lot higher prices than the 2020 highs.”
Gold has traditionally been a second-half inflation player. Unlike crypto, gold has a long history as a safe haven asset and is recognized by the world as a store of value. Crypto faces an uncertain future, with governments still trying to get a hold on how to regulate it and many, like China, looking at outright bans on mining. As the world moves toward zero emissions, crypto’s environmental cost may prove steep.
Investors can get exposure to physical gold through the Sprott Physical Gold Trust (PHYS). PHYS is fully allocated to gold that is safely stored, easy to buy or sell, and redeemable. Meanwhile, gold equities exposure can be gained through the Sprott Gold Miners ETF (SGDM) and the Sprott Junior Gold Miners ETF (SGDJ).
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