As a seasoned researcher with a knack for deciphering market trends and a soft spot for digital assets, I find myself intrigued by the ongoing dance between Bitcoin and Gold. Over the years, I’ve seen these two contenders jostle for position, each vying to be the ultimate store of value.
In contrast to the escalating macroeconomic scenarios, Gold, also known as gold bullion, has been breaking new records, reaching an impressive $2,564 per ounce on a recent Friday. This surge represents a significant 25% increase in its value year-to-date. Meanwhile, Bitcoin, denoted by BTC and currently valued at approximately $57,798, has demonstrated less volatility over the past 24 hours (-0.5%). Its market capitalization stands at a substantial $1.14 trillion, with a 24-hour trading volume of $28.44 billion.
In the third quarter, gold’s value increased by 10%, while Bitcoin’s price decreased by 7% and is now around $58,000. Compared to the S&P 500, Wall Street’s key indicator, which only rose by 2% this quarter, gold has performed exceptionally well.
From another perspective, Bitcoin is responding to broader economic trends and exhibiting volatility due to uncertainties surrounding the unwinding of Yen carry trading and the possibility of a US economic downturn. Many financial experts are pointing out differences between Bitcoin and Gold as significant factors right now. The recent surge in gold prices might indicate favorable macroeconomic conditions for Bitcoin in the coming days.
As per Charlie Morris, the head of ByteTree and its founder, the increase in gold’s value is largely due to increased hoarding by central banks, a situation that Bitcoin has not yet encountered. This pattern could potentially indicate easier monetary policies in the future. In conversation with CoinDesk, he further noted:
Government bonds held in reserves are less appealing compared to gold, which has become more prominent. Central banks are increasingly stockpiling gold, a shift driven by factors beyond just U.S. Treasury inflation-protected securities, such as persistent government deficits on a global scale. The growing appeal of gold is indicative of expanding and anticipated fiat money supply, among other things. Bitcoin could see an upsurge when the economy recovers or when the promise of further stimulus becomes more audible.
Why Money Will Flow Back into Bitcoin?
Looking at the annual growth trend, it’s apparent that the total fiat currency supply from the U.S., Eurozone, UK, and Japan became positive by the close of August. Given that central banks are considering a move towards monetary easing, there’s a strong possibility that the currency supply will keep increasing further.
On last Thursday, the European Central Bank lowered its interest rates. It is anticipated that the Federal Reserve will do the same in the upcoming week, indicating the commencement of a period of relaxation that might result in more financial encouragement for American investors.
Andre Dragosch, the research leader at Bitwise Europe, observed that gold’s recent surge might be due to a significant decrease in inflation-beating U.S. government bond yields. Typically, this kind of drop in real yields encourages investors to move their funds towards riskier investments like bitcoin and tech stocks, as evidenced by market trends in 2020. In conversation with CoinDesk, Dragosch commented:
Gold prices are no longer connected to U.S. real interest rates, indicating two possibilities: Either gold is overvalued or it’s predicting a significant drop in U.S. real interest rates ahead of time. A significant fall in U.S. real interest rates suggests a major loosening of monetary policy, which has not been fully factored into broader financial markets yet, except for gold. Therefore, bitcoin and other assets may also rise along with gold.
Conversely, central banks have been actively acquiring large amounts of gold, with July’s intake totaling 37 tonnes. This marks the most substantial monthly acquisition since January, surpassing the previous record of 45 tonnes in net purchases.
Alex Kruger, a partner at digital assets and macro consultancy firm Asgard Markets, advised investors against overanalyzing the impact that gold’s surge might have on Bitcoin.
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2024-09-13 15:24