Whenever Geopolitics takes center stage we are used to seeing VIX rise and Gold rise. While that relationship still exists, it seems as though more and more, Bitcoin is the beneficiary of any global turmoil.

Since May 1, we have had 4 noticeable increases in volatility. Bitcoin responded much more acutely than gold did to each of those rises. Now, almost six months later, Bitcoin is up over 15.5% while gold is only up 1.6%.

It could be that these spikes in volatility were quite low on an absolute basis (VIX barely reached 16 the entire summer), so gold, the more mature product didn’t need to react much? That explanation would be the best from the perspective of gold holders.

Is it because so much wealth has an easier time accessing cryptocurrencies than gold? That the belief that cryptocurrencies is not as burdened by borders and physical location as gold? That is a possibility and one that would undermine the use of gold going forward.

Is it just because there is so much more going on with cryptocurrency adoption rates that alternative reasons dwarf any geopolitical concern? This seems the most plausible explanation to me. It would also fit into a scenario where those who want to own gold already own it, limiting new flows, while bitcoin is still a nascent ‘product’ to be used as a potential hedge?

I think the last explanation is the best and it leaves the door open to the ongoing debate – of whether cryptocurrencies can deliver on their hype – or they will disappoint and turn out to be another in a long line of bubbles.

For me, the jury is still out on the long term future of Bitcoin, but it is clear, at least in the U.S. that speculators willing to trade bitcoin are hampered by the lack of a ‘mainstream’ vehicle to trade it. Bitcoin futures have not yet arrived and the SEC has being refusing applications for ETFs based on futures contracts (link) that don’t yet exist – a logical rationale.

At the same time, I find it difficult to get excited about gold as a hedge here. I’d rather own treasury bonds than gold as my ‘universal hedge’ as the risk of inflation seems very low and gold’s dominance as a ‘universal hedge’ seems to be waning. (Since gold peaked at $1,900 an ounce on September 5, 2011 – you might even argue that gold has been losing its luster for a very long time)