Could Bitcoin And Gold Benefit From Weakness In The Stock Market?

Stocks have encountered some notable volatility lately, with the benchmark S&P 500 Index suffering a correction last month and experiencing further weakness in March.

The major stock indices — specifically the S&P 500 and the Dow Jones Industrial Average — have not fallen in to a bear market yet.

However, any such decline could potentially cause investors to panic, driving them to safe-haven assets like Bitcoin and gold.

Turmoil For Stocks

The stock market has had a rough ride lately. The Dow Jones Industrial Average (DJIA), for example, fell more than 700 points today after President Donald Trump announced tariffs on Chinese goods, according to Bloomberg.

Thus far, these indices have suffered modest volatility.

However, should these benchmark groups of stocks fall in to a full-fledged bear market, investors could panic, flocking to the perceived safety of assets such as gold and Bitcoin.

Bitcoin’s Potential Tailwinds

Bitcoin will likely benefit if stocks suffer a “major pullback,” stated Tim Enneking, managing director of Crypto Asset Management.

“So far we haven’t seen any flows from the stocks into Bitcoin,” he stated, emphasizing that many traders do not believe that the recent declines in stocks constitute a bear market.”

He emphasized that “For now most of the selling has been from institutional investors and bots.”

Greenspan predicted that if a crisis does materialize, “It’s the retail investors that you’d likely see moving to digital assets.”

‘Too Early To Tell’

Cryptocurrency “certainly has some of the advantages of precious metals,” said Parker, COO of IRA Bitcoin LLC. “It is a non-correlated asset that should be resistant to market volatility and may even benefit from a sentiment-based shift to alternative assets,” he stated.

“However a severe market downturn will put pressure on all highly appreciated assets as investors seek to offset market losses with cryptocurrency gains.”

Gold’s Potential Gains

Should stocks push lower, gold could certainly benefit, noted analysts.

Not only is the precious metal a more effective safe-haven asset than bonds, but it is also a “non-correlated asset,” said Ron Smith, director of trading at GSI Exchange.

Greenspan offered similar input, stating that “Gold should act as a good indicator of safe haven sentiment.”

“If things do get ugly we could see it spike,” he added.

Bitcoin is relatively new, having existed for less than a decade.

In contrast, “gold has 10,000 years of monetary history behind it, and is universally accepted,” Isaacs noted.

Further, gold benefits from a wide range of hedging products, for example options and futures, he stated.

Finally, he emphasized that gold is “the go-to standard to hedge against potential downside.”

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