In the past four months, gold has lost $ 4 trillion in market valuation. Bitcoin, in turn, gained about $ 180 billion over the same period.
Both gold and bitcoin have benefited from the Federal Reserve’s aggressive monetary easing policies. The precious metal hit its record high of $ 2,075.82 an ounce on August 7, 2020.
But it couldn’t hold the top. A wave of profit sales hit, correcting the XAU / USD price by as much as 14.97 percent
Bitcoin, on the other hand, also saw local sell-offs, but continued to rise. On December 1, 2020, the cryptocurrency flagship hit a new record high of $ 19,873 per token (data from Coinbase). The upward trend was reminiscent of previous studies showing a lagged positive correlation between gold and bitcoin .
Bitcoin has increased more than 400 percent since March 2020. Source: BTCUSD on TradingView.com
So does this mean that Bitcoin will also suffer the same fate as gold after it hit its all-time high? Opinions on this differ.
The store of value thesis
According to JP Morgan Chase & Co., family offices are actively selling their gold-based exchange-traded funds in order to get exposure to cryptocurrencies. So far, they have sold 93 tons of precious metal valued at around $ 5 billion. At the same time, the inflow of capital into the Grayscale Bitcoin Trust has doubled.
The study makes gold and bitcoin look like competing assets. This means that investors are more likely to move their store of value from physical to digital, which would pull a good chunk of capital away from what are known as obsolete markets.
Dan Tapeiro, a macro investor who is involved in both gold and bitcoin, believes this is possible. Tapeiro:
“$ 2 trillion worth of gold has been wiped away in the past 4 months. No, not all of it went into Bitcoin, which gained $ 180 billion over the same period, but a rate of 10% would still be impressive. “
Charlie Morris, Chief Investment Officer at ByteTree Asset Management, also believes that money has flowed from the gold markets to Bitcoin. Still, he also recalls that platinum – a commodity rival – has also seen an uptrend in recent sessions, offering more than an alternative to the yellow metal.
„The gold market has been pretty hot this summer, so it’s not surprising that the price slipped back a little on the way to the end of the year,“ said Morris. „Some money went out of the gold, maybe it went into platinum because of the green movement, and obviously some of it went into bitcoin because of all this fuss.“