Bitcoin’s perception as a safe haven asset is now increasing more than ever according to a paper by the Department of Economics of the University of Pretoria. It is being considered as the ‘new gold’. This means that investors tend to place their money in these assets as an alternative to stocks.

The paper focuses on the popular notion that Bitcoin can serve as a hedge amid global uncertainties. It finds a low extreme correlation between gold and Bitcoin indicating that both serve as stable investments amid turbulent environments. The paper also explores the correlation of extreme returns and market instabilities (booms and crashes) decreases which means that Bitcoin (like gold) can provide the much sought-after safe-haven investment during these conditions. This means that during financial crises, gold and now Bitcoin are reliable investments.

The authors of the paper say,

“We find a low extreme correlation between bitcoin and gold, which implies that both assets can be used together in times of turbulence in financial markets to protect equity positions.”

As reported earlier, key differences between the nature of the assets have led many economists to believe that Bitcoin could possibly replace gold. However, there is also an opposing view to this perception where people believe that the value of gold will persist for a significantly larger period of time when compared to Bitcoin. Moreover, Bitcoin relies on the Internet while gold can be physically held.

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