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Investors prefer gold due to the volatility of cryptocurrencies

They prefer the precious metal because of its reliability and stability in the market

Investors are reversing from cryptocurrencies after chasing the digital currency’s growth and drop for the past few months, according to a report released by Quantum Mutual Fund. They prefer the precious metal because of its reliability and stability in the market.

Bitcoin dropped to 36 percent and, in May 2021, hit its worst monthly fall since November 2018. The heavy evaluations and the environmental impact over mining the digital currency and the regulatory crackdown of it in China took a toll. The May fall is the second biggest since May 2013, according to CoinGecko, a cryptocurrency tracker.

Chirag Mehta, senior fund manager, alternative investments at Quantum Mutual Fund, told the media, “The sheer price performance of cryptocurrencies or the fear of missing out (FOMO) lured many investors to chase this well-marketed promise of an alternative form of digital currency and helped push bitcoin to a record near $65,000.” He continued that this upward journey has been highly volatile. That is because cryptocurrencies are a relatively new asset class with fewer participants. It is a debatable intrinsic value that makes it susceptible to significant price fluctuation and speculation.

On the other hand, in May 2021, the prices of gold rose above the critical psychological level of $1,900 per ounce. The precious metal ended the month eight percent higher and turning positive for the year to date. The fund house states that much of May’s action in gold was a result of proof showing a rise in prices in the US and the weakening of its key rivals, the dollar index and bitcoin. Moreover, global equities markets are supported by a coordinated effort from major central banks that have contributed trillions of dollars into financial markets since 2020 while committing to lower-for-longer interest rates.

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