Gold has just established a historical peak of 3,004.94 USD/ounce (data from #FXCE ), marking an important milestone in a volatile global economic context. With gold continuing its upward trend, many investors are asking: How will this affect the cryptocurrency market, especially Bitcoin?
1. Gold and Bitcoin: Competing Hedge Assets?
Both gold and Bitcoin are considered hedge assets against inflation and economic risks. When gold prices rise sharply, this indicates that investors are seeking safety in traditional assets rather than riskier assets like stocks or crypto.
However, 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 see BTC as a store of value and push BTC prices up along with gold.
• Scenario 2: Gold attracts liquidity from crypto – Traditional investors may withdraw funds from Bitcoin to invest in gold, especially when gold is reaching new highs.
2. Inflation and Monetary Policy: Bitcoin or Gold to Benefit?
A sharp rise in gold prices often reflects concerns about inflation and the loose monetary policy of central banks. In this context, Bitcoin could also benefit because:
• Bitcoin is seen as a hedge against inflation: When inflation rises, investors seek assets with limited supply such as $BTC .
• The U.S. Federal Reserve (Fed) may loosen policy: If the Fed has to lower interest rates to stimulate the economy, this could weaken the USD and boost capital flowing into both gold and Bitcoin.
However, if gold becomes the preferred safe-haven asset over Bitcoin, capital may flow strongly into gold instead of crypto, slowing down the upward momentum of the cryptocurrency market.
3. The Volatility of Crypto as Gold Continues to Rise
If gold prices continue to rise above 3,100 USD/ounce, this could have significant impacts on the crypto market:
• Institutional investors may shift capital flows: Some investment funds may transfer some capital from Bitcoin to gold to reduce risk.
• Market sentiment could be affected: If gold continues to rise sharply, many individual investors may take profits from BTC to switch to gold, creating short-term downward pressure on crypto.
• Stablecoins and tokenized gold may benefit: As demand for gold increases, financial products such as gold-backed assets on the blockchain (e.g., PAXG, XAUT) may receive 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, driving up Bitcoin's value according to the law of supply and demand.
• The interest of major financial institutions: Bitcoin ETFs have attracted billions of USD in capital flows, helping #bitcoin gain increasing recognition.
• Fed's monetary policy: If the Fed lowers interest rates in mid-2024, Bitcoin could benefit significantly from capital flowing into risk assets.
Conclusion: How Will Crypto Be Affected?
A peak in gold prices can have both positive and negative effects on Bitcoin and the crypto market. If gold continues to rise, Bitcoin may either follow or experience a diversion of capital. However, with the upcoming Bitcoin Halving 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