Gold has just set a historical peak of $3,004.94/ounce (data from #FXCE ), marking an important milestone in a volatile global economic context. With gold continuing its upward trend, many investors are questioning: How will this impact the cryptocurrency market, especially Bitcoin?
1. Gold and Bitcoin: Competing Hedge Assets?
Both gold and Bitcoin are seen as hedges against inflation and economic risk. When gold prices rise sharply, it indicates that investors are seeking safety in traditional assets rather than in riskier assets like stocks or crypto.
Nevertheless, Bitcoin has gradually asserted its position as 'digital gold,' with many similarities in operation such as limited supply (only 21 million BTC). Therefore, if gold continues to rise, there will be two scenarios impacting the crypto market:
• Scenario 1: Bitcoin benefits alongside gold - Investors perceive BTC as a store of value and drive BTC prices up in tandem with gold.
• Scenario 2: Gold attracts liquidity from crypto - Traditional investors may withdraw money from Bitcoin to invest in gold, especially as gold is reaching new highs.
2. Inflation and Monetary Policy: Will Bitcoin or Gold Benefit?
A strong rise in gold prices often reflects concerns about inflation and the loose monetary policies of central banks. In this context, Bitcoin could also benefit because:
• Bitcoin is seen as a hedge against inflation: As inflation rises, investors seek assets with limited supply like $BTC .
• The U.S. Federal Reserve (Fed) may ease its policy: If the Fed is forced to cut interest rates to stimulate the economy, this could weaken the USD and drive capital flows into both gold and Bitcoin.
However, if gold becomes a more preferred safe-haven asset than Bitcoin, capital may flow strongly into gold instead of crypto, slowing the upward momentum of the cryptocurrency market.
3. The Volatility of Crypto as Gold Continues to Rise
If the gold price continues to rise above $3,100/ounce, this could have significant impacts on the crypto market:
• Institutional investors may shift capital: Some investment funds may move some capital from Bitcoin to gold to reduce risk.
• Market sentiment may be affected: If gold continues to rise sharply, many individual investors may take profits from BTC to switch to gold, putting short-term adjustment pressure on crypto.
• Stablecoins and tokenized gold may benefit: As demand for gold rises, financial products like gold assets on the blockchain (e.g., PAXG, XAUT) may gain more attention.
4. Can Bitcoin Reach New Heights Alongside Gold?
Although gold is leading the upward trend, Bitcoin still has a chance to benefit from the following factors:
• Bitcoin Halving in April 2024: This event will reduce the amount of newly mined BTC, pushing Bitcoin's value up according to the laws of supply and demand.
• Interest from major financial institutions: Bitcoin ETFs have attracted billions of USD in capital flows, helping #bitcoin to gain more widespread recognition.
• Fed's monetary policy: If the Fed cuts interest rates in mid-2024, Bitcoin could benefit significantly from the influx of capital into risk assets.
Conclusion: How Will Crypto Be Affected?
Soaring gold prices can have both positive and negative effects on Bitcoin and the crypto market. If gold continues to rise, Bitcoin may either follow suit or experience a diversion of funds. However, with the upcoming Bitcoin Halving event and ETFs supporting the market, BTC still has a chance to reach new highs in 2024.
👉 What do you think about the future of Bitcoin as gold continues to rise? Please share your thoughts! #anhbacong