The co-founder and CEO of Coinbase, Brian Armstrong, was surprised by the recent drop in bitcoin prices.
Yesterday he wrote on Twitter:
“Surprised we’re seeing the Bitcoin price fall in this environment, would have expected the opposite”.
Surprised we're seeing the Bitcoin price fall in this environment, would have expected the opposite.
— Brian Armstrong (@brian_armstrong) March 9, 2020
Armstrong definitely refers to the idea that bitcoin could be considered “digital gold”.
In fact, yesterday, as the stock markets collapsed in a way that hadn’t been seen for a long time, the price of gold has fluctuated slightly upwards and then downwards, but returning to roughly the same level at the end of the day.
In theory, if bitcoin was really a digital version of gold one could have expected a similar behaviour in its price, which instead fell by about 10%.
What Armstrong points out is that, in the context of the stock market crashing significantly while gold is holding up, one could have expected a stable, if not growing, bitcoin price.
Yet, a few days ago, for example, the President of Virgin Galactic, Chamath Palihapitiya, pointed out that the definition of bitcoin as “digital gold” would not necessarily be correct.
Palihapitiya argues instead that it should be considered as a new free-flowing asset, i.e. the price of which follows a trend and a path of its own.
Gold is the safe-haven asset par excellence, so somehow when the stock markets are suffering its price can behave in an inversely correlated way, and rise.
In the specific case of yesterday, the price has not gone up, but considering the huge outflow that has occurred on the stock markets, gold has behaved exactly as one would expect it to do a safe haven asset.
Bitcoin, on the other hand, failed to do the same: despite the fact that yesterday’s decline could also be due to the weakness of the financial markets – although there are in fact other hypotheses on the subject that seem more convincing and that ignore the collapse of the stock exchanges – it seems more likely to be due to reasons specific and peculiar to its own market.
Therefore, the movements of these days seem to support the hypothesis suggested by Palihapitiya, and deny the hypothesis suggested by Brian Armstrong, who himself said he was surprised by what happened.