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Cryptocurrencies are sometimes hailed as digital gold<\/a>, a so-called save haven asset that can serve as a hedge against more volatile investments, like stocks. But it\u2019s hardly the case in the market rout we are seeing now. It turns out, when fear of economic uncertainty is real, crypto is not nearly a good hedge as actual gold or even government-backed currencies.\n<\/p>\n On May 9, when major stock indexes logged their worst single-day losses since early 2020 (S&P 500 fell 3.2 percent and Nasdaq down 4.3 percent), cryptocurrencies dropped even farther, with bitcoin and ethereum both down nearly 10 percent.<\/p>\n \u201cIt is now clear that bitcoin trades parallel to the risk assets, rather than [as] a safe haven,\u201d said Ipek Ozkardeskaya, an analyst with Swiss bank Swissquote, in a report<\/a> in April. \u201cbitcoin is still not the digital gold, it\u2019s more of a crypto-proxy for Nasdaq, apparently.\u201d\n<\/p>\n Since peaking at $69,000 in November 2021, bitcoin has lost half its dollar value and moved in the same downward direction as stocks amid surging inflation, rising interest rates, and geopolitical uncertainties stemming from Russia and China.\n<\/p>\n Gold and other precious metals prove to be much better hedges in times like this. While bitcoin is down 34 percent and the in 2022 so far, gold has held steady around $1,800 per ounce. Wells Fargo analysts predict<\/a> gold could reach as high as $2,100 per ounce this year.<\/p>\n Even cash is a better asset to hang on to than crypto, despite inflation, thanks for a strong dollar. The U.S. Dollar Index, which measures the value of U.S. dollar relative to foreign currencies, is up 8.3 percent<\/a> this year.\n<\/p>\n The Federal Reserve has vowed to combat inflation while maintaining a strong economy. The central bank has begun raising interest rates and plans to reduce securities holdings<\/a> on its balance sheet. Rising interest rates usually mean investors can get more attractive returns from low-risk investments, such as savings accounts and government-backed bonds, which prompt them to pull out of riskier\u00a0assets, like stocks and cryptocurrencies.\n<\/p>\n Occasional intense selloffs like the one seen on May 9 are also driven by fear that the Fed\u2019s efforts to tame inflation may end up causing a recession. \u201cCorporate earnings tend to suffer during recessions, and that\u2019s what the stock market is worried about,\u201d William Huston, the chief investment officer of asset manager Bay Street Capital Holdings, told Fortune<\/em> on May 9.<\/p>\n \t\t\t\t![\"Turns](\"https:\/\/observer.com\/wp-content\/uploads\/sites\/2\/2022\/05\/GettyImages-1240021365.jpg?quality=80&w=970&strip\")
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