Gold’s chances appear to diminish as bitcoin’s shine.
According to numerous analysts, one potential explanation for Bitcoin’s extraordinary recent price increase is huge investment outflows from another famous inflation hedge: gold.
Spot gold swooned over the last week, sliding 4.62 percent to $1,857. Previously, the currency has been – in tandem with Bitcoin, up over 40 percent from $28,000 last week’s lows.
In a Tweet on Friday, Charlie Morris, founder and CIO of ByteTree Wealth Management, said that the gold pull could be due to investors switching to Bitcoin:
With bond yields up and inflation expectations down today, #gold has taken a hit. This justifies a $50 sell off, but price is down $120. I’d attribute the excess to flows moving towards #Bitcoin pic.twitter.com/qsWBb8NaXA
— Charlie Morris (@AtlasPulse) January 8, 2021
Likewise, earlier this week, CNBC’s Mad Money host Jim Cramer said that the outflows from gold ETFs are “all going to crypto.” Monitoring inflows and outflows from Grayscale’s Bitcoin investment trust and gold ETFs support this statement, when Grayscale eclipsed gold:
#Bitcoin‘s competition w/gold has already started as evidenced by >$3bn of inflows into Grayscale Bitcoin Trust & >$7bn of outflows from Gold ETFs since Oct, JPM says: Competition w/gold as alternative currency will continue given millennials will become over time more important. pic.twitter.com/lkXmDIN9e4
— Holger Zschaepitz (@Schuldensuehner) January 4, 2021
Moves may be a symbol of the growing status of Bitcoin as a legal asset class. Gold and Bitcoin have long been linked as both are seen as a way to defend capital from inflation and macroeconomic volatility, but if market fluctuations over the past week are any indicator, Bitcoin may win the narrative race.
In an interview with Bloomberg, Coinshares Chief Revenue Officer Frank Spiteri said that the narrative around Bitcoin as an inflation hedge is gaining ground “in the face of a highly unconventional monetary policy environment.”
“It seems like we’re in the middle of a simultaneous awakening among institutions to Bitcoin as an uncorrelated store of value assets,” he said.
Expert findings came after a rare flipping earlier this week: as of Friday, a single bitcoin is worth more than a 20-ounce gold strip.
Even, with all the bearish market activity and Bitcoin’s rise, several high-profile gold bugs struggle to budge on their positions. In a Tweet yesterday long-standing sceptic Bitcoin and gold investor Peter Schiff reported that once investors realise the inflation risk, they will return to the bullion:
Today’s weak economic data on jobs is causing investors to buy risk assets and sell safe-havens like #gold. The weaker the economy gets the more money the Fed prints to prop it up. So, the real risk is #inflation, and once investors understand this, they will seek safety in gold.
— Peter Schiff (@PeterSchiff) January 8, 2021
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