While BTC outperformed the crypto market in the days following the Russia-Ukraine conflict. It has underperformed since the commencement of the Middle East conflict. But things are changing!
Let’s examine the performance dynamics and correlation between Bitcoin and Gold.
Source: Kaiko
An interesting observation emerges regarding the performance of Bitcoin relative to gold. The BTC to gold ratio, a gauge of their relative performance, has dropped from 15 to 14, marking its lowest since August.
Persistent Interest Rate Concerns
Market apprehensions persist regarding interest rates, with former U.S. Treasury Secretary Janet Yellen stating that the country may endure high rates:
- Addressing the issue, Philadelphia Federal Reserve President Patrick Harker remarked during a speech at the Mortgage Bankers Association’s annual convention on Monday.
- He highlighted the significant hindrance high-interest rates pose to first-time home buyers. Emphasizing their impact on access to the housing market.
What Now?
In the face of current market fluctuations, do not succumb to despair. Such variations are inherent in the cyclical nature of financial markets.
Source: GlassNode
An intriguing metric offering insight is the percentage of Bitcoin long-term balances relative to the total supply, recently reaching its highest point since 2010. This notable trend emphasizes seasoned crypto investors’ continuous accumulation and retention of assets.
Considering the impending bull market, the current juncture presents an advantageous period for accumulation and strategic preparations. As we chart the course ahead, it becomes imperative to closely monitor upcoming events with the potential to impact the crypto industry. Key catalysts on the horizon this week include:
- The Goldman Sachs earnings report.
- China unveiling Q3 GDP information.
- Federal Reserve Chair Powell delivering a pivotal speech.
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5 Reasons
1. Safe Haven Status of Gold
Traditionally, gold has been considered as a safe-haven asset. In times of economic uncertainty such as war, investors tend to flock to gold. This drives Gold prices higher. Since Bitcoin is the Digital Gold, it is a modern safe-haven asset. When gold prices rise, some investors consider diversifying their portfolios by adding less correlated assets like Bitcoin.
2. Inflation Hedge Status
Both gold and Bitcoin are seen as stores of value and hedges against inflation. Since Janet Yellen thinks the interest rates would be high, it directly contributes to inflation. A rise in gold prices, reflective of inflation, could also make Bitcoin more attractive to investors.
3. Market Sentiment
The Israel-Hamas war has contributed to fear in the market. The US is indirectly involved in the war since Israel is the largest cumulative recipient of U.S. foreign aid. The war could leave a negative impression on the stability of the global economy. Such uncertainties are generally good for gold prices, and probably for Bitcoin.
4. Liquidity
For many investors in the war-affected regions and the Asia-Pacific, liquidity is a priority. Even though Gold has universal liquidity, it doesn’t offer instant liquidity because it is a physical asset. In such cases, investors shall prefer Bitcoin.
5. Demographics
Younger investors might be more inclined toward Bitcoin, while traditional investors might favor gold. The risk-taking attitude of younger investors will be key in adding more buy pressure to Bitcoin. While the cyber security threats and limited access to the internet can push the traditional investors to Gold. Regardless, the gold price movement could influence the investment decisions of individuals at the intersection of these demographics. One way or other, Gold may dictate the global economics along with Petroleum. However, Bitcoin could be the top gainer in any such scenario.
Disclaimer
The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment, and informational purposes only. Any information or strategies are thoughts and opinions relevant to the accepted risk tolerance levels of the writer/reviewers, and their risk tolerance may differ from yours.
We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments, so please do your due diligence.
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