Bitcoin trails gold as safe-haven assets demand rise

• Published On: 08 February 2025 at 10:17

Bitcoin, which outperformed most asset classes in 2024, is now under pressure as investors seek traditional safe-haven assets amid Donald Trump's potential return to the White House and rising geopolitical tensions.

According to Bloomberg data, Bitcoin has gained slightly more than 3% year to date, trailing gold's 9% gain.

Gold reached a record $2,882 per ounce following Trump's Feb. 4 remark about a possible US takeover of Gaza, which his aides later sought to clarify, while Bitcoin is still about 10% below its peak.

Although Bitcoin is frequently compared to gold as a store of value due to its finite supply of 21 million tokens, it has yet to fully establish itself as a safe-haven asset.

Gold's resilience during economic uncertainty has been bolstered by events such as the US-China trade war and tariff threats. Bitcoin, on the other hand, has closely tracked the movements of technology stocks rather than acting as a hedge against market volatility.

Aoifinn Devitt, a senior investment advisor at Moneta Group LLC, believes that while Bitcoin can serve as a hedge against fiat currency, its appeal is diminished in a market where the US dollar remains in high demand.

"In time it will have its own characteristics that act separate and apart from markets but at this point it is behaving as the riskiest of risk-on assets," says Devitt.

However, Paul Howard, Senior Director at market maker Wincent, stated that the introduction of exchange-traded funds (ETFs) that invest directly in Bitcoin will gradually reduce volatility, prompting investors seeking high-risk opportunities to shift to more speculative cryptocurrencies.