Is the status of gold threatened by Bitcoin?

Abstract

This paper evinces the ability of gold to avoid risks during periods with great fluctuations in the Bitcoin market. We apply bootstrap full-and subsample rolling-window Granger causality tests to explore the causal relationship between Bitcoin price (BCP) and gold price (GP). The empirical results show that an increase in BCP can cause GP to decrease, indicating that the prosperity of the Bitcoin market undermines the hedging ability of gold. However, a decrease in BCP causes GP to increase, and it also emphasizes that the ability of gold to avoid risks persists. Hence, the status of gold will not be completely threatened by Bitcoin, and they are complementary to each other instead of in competition. In turn, both positive and negative influences of GP on BCP suggest that fluctuations in BCP can be predicted through the gold market. In situations of severe global uncertainty and complicated investment environments, investors can benefit from complementary markets to optimize their asset allocation. Additionally, countries can grasp the trends in Bitcoin and gold prices to prevent large fluctuations in both markets and to reduce the uncertainty of the financial system.

Co-movements between Bitcoin and other asset classes in India

“…Also, Bitcoin is primarily used as an alternative currency owing to its low transaction costs, its peer-to-peer, international characteristics and free from government intervention. In recent studies, Su et al (2020) suggest that Bitcoin's hedging ability is considered digital gold or a medium of exchange, which is also a US dollar and gold property. Bouoiyour et al (2019) argue that Bitcoin and gold are likely to be harmonious to each other due to their positive relationships.…”

Economic Policy Uncertainty and Cryptocurrency Market as a Risk Management Avenue: A Systematic Review

“…Recent research discovered that when the price of Bitcoin surges it causes a decline in the price of gold, thus a clear sign of undermining the historical hedging aptitude of the gold. However, the same pattern has been found for gold against Bitcoin, therefore, both can be used as an alternative not in a competition against the global EPU in bearish and bullish market sentiment (Su et al 2020) while both of them mitigate the risk prevailing in the financial system. Qualities of being utilized as safe-haven and importantly, store of value, often feature Bitcoin as identical to gold (Baur and Hoang 2020).…”

“…Although, financial securities of emerging markets, the traditional hedger (gold), and Bitcoin have potential to be utilized for mitigating global economic policy uncertainty and risk in other traditional financial assets equities (Bouri et al 2017a), bonds and energy commodities are an immense cause of global economic policy risk (Bouri et al 2017b(Bouri et al , 2017c. But, interestingly in a manner, Bitcoin has come to be seen as a complementary use with gold (Baur and Hoang 2020;Dyhrberg 2015a;Su et al 2020), therefore the other cryptocurrencies' behavior must be studied. The volatility of cryptocurrencies driven by the global business cycle (Demir et al 2018) and global economic policy uncertainty has a close relationship with the global business cycle, thus, the pattern of GEPU has to be thoroughly analyzed to exploit diversification benefits.…”

Influence of Perceived Risk of Blockchain Art Trading on User Attitude and Behavioral Intention

“…In addition to gold capital increasing with hedging risk [97], Bitcoin investment has also climbed. Due to the complementary relationship between Bitcoin and gold [98] and the tendency toward safe investment during the pandemic period [99], Bitcoin, which is owned in a digital wallet, has become a popular choice among diversified asset portfolios, thereby greatly enhancing the willingness of consumers to use blockchain technology. Therefore, economic policy uncertainties caused by the pandemic may also be one of the variables influencing the use of blockchain technology.…”