Gold’s Drop Could Drive Bitcoin Higher, Analysts Suggest

Gold prices have recently fallen by nearly 10%, while Bitcoin has surged to $97,000. Analysts suggest that this trend may be linked, with Bitcoin becoming a preferred hedge over gold amidst changing market conditions. The ETF inflows show a notable shift favouring Bitcoin, hinting at a potential rise past the $100,000 mark.

In a surprising turn of events, the recent correction in gold prices might be paving the way for a Bitcoin rally. The correlation between these two assets has turned inverse, especially evident in the last week with different days showing contrasting ETF flows. Gold, which enjoyed a notable rise in previous months, has now decreased nearly 10% recently, causing analysts to shift their focus towards Bitcoin.

Gold prices, influenced by various economic factors, peaked above $3,500 per ounce around April 21. During that timeframe, Bitcoin also hit $87,000 but had fallen roughly 20% since its January record high. However, as gold falters, Bitcoin is gaining momentum, marking a 10% increase recently and reaching $97,000, its highest level in two months.

Geoff Kendrick from Standard Chartered offers insights into why Bitcoin could be more advantageous as a hedge compared to gold. He suggests that Bitcoin represents a better shield against strategic asset reallocations, especially as investment strategies from the U.S. evolve. The shift in ETF inflows—where Bitcoin funds have seen a surge—is stark, and it reflects growing confidence in the cryptocurrency.

Kendrick highlights a crucial observation: the last time ETF inflows favoured Bitcoin over gold as significantly was during the U.S. presidential election week. Remarkably, Bitcoin’s price surged by more than 40% over the following two months, rising past the $100,000 mark. This trend suggests that investors may be rethinking traditional hedges like gold in favour of Bitcoin as its potential becomes more apparent.

The state of the market could indicate a shift not just in asset performance but also in investor behaviour. The combination of gold’s downturn and Bitcoin’s ascent might illustrate a broader trend in how investors are allocating their resources in these uncertain economic times. As Bitcoin continues to gain traction, many are left to wonder if these trends will establish a new precedent for how these assets interact in the future.