The case for bitcoin as 'digital gold' is falling apart
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A key investment case for bitcoin is deteriorating as geopolitical uncertainty and rising inflation hammer cryptocurrency prices.
The price of bitcoin fell to a two-week low Tuesday after Russian President Vladimir Putin ordered troops into Donetsk and Luhansk, two breakaway regions in eastern Ukraine, shortly after declaring them as independent.
Bitcoin is often referred to as «digital gold» by its backers. The term refers to the idea that bitcoin can provide a store of value similar to gold — one that's uncorrelated with other financial markets, like stocks.
Bitcoin bulls also see the cryptocurrency as a «safe haven» asset that can serve as a hedge against global economic uncertainty and increasing prices, which reduce the purchasing power of sovereign currencies like the U.S. dollar.
With inflation at historic highs, you'd expect this would be bitcoin's time to shine — U.S. consumer prices last month rose the most since February 1982, according to Labor Department figures.
Instead, the cryptocurrency has lost almost half of its value since reaching an all-time high of nearly $69,000 in November. That's led analysts to question whether its status as a form of «digital gold» still rings true.
«Bitcoin is still early in its maturity curve to be firmly placed in the category of 'digital gold,'» Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, told CNBC.
The latest declines for bitcoin came in tandem with a rout in global stocks, with the S&P 500 closing out Tuesday's session in correction territory. Bitcoin's price has increasingly been tracking moves in the stock market, with correlation between bitcoin and the S&P 500 steadily rising.
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