Gold has been on a tear in recent months, touching records highs and showing signs of powering through the psychological $2,000 level. The meteoric rise has come at the backdrop of growing economic uncertainty amid the COVID-19 pandemic. While the focus has been on the bullion, Bitcoin and other cryptocurrencies have also rallied as investors shift focus to low-risk assets.
Safe-Haven Demand
The economic uncertainty and the ever-growing tensions between the U.S and China have forced investors to scamper for safety into safe-haven and low-risk financial instruments. Likewise, businesses have branched out into decentralized financial platforms as they seek to shield themselves from the shocks brought about by the uncertainty.
Cryptocurrencies more so Bitcoin have emerged as ideal financial tools for shrugging off the unending uncertainty in the global scene. Bitcoin prices have rallied by more than 40% in recent weeks, reaching highs of $11,000 before retreating to the $10,800 level. A surge in Bitcoin price affirms how the flagship cryptocurrency is increasingly matching gold in pricing.
Bitcoin stellar performance is attributed to, among other things growing investment into the blockchain space as people continue to shun the extreme levels of volatility in the cryptocurrency market. In addition, Bitcoin has emerged as a potential safe-haven, as is the case with gold. According to deVere Group, Nigel Green, people are increasingly investing in Bitcoin because it is not tied to any specific country.
Bitcoin vs. Gold vs. Dollar
Bitcoin’s reputation as a form of digital gold has grown in recent months as the U.S dollar continues to lose its edge as a safe-haven. There is already talk that Bitcoin could surpass gold and the U.S dollar as the ultimate safe-haven asset and as a reliable store of value and scarcity.
Gold is becoming increasingly popular with people who initially had doubts about its credentials as a store for value. The low-interest rate environment coupled with an unstable stock and forex market has only pushed more investors into the cryptocurrency space away from yields.
The recent spike in Bitcoin price above the $11,000 level is already eliciting suggestions that it still has room to run on the upside as more people buy the cryptocurrency story. Renowned cryptocurrency analyst, Tone Vays, believes the flagship digital currency has what it takes to reach new all-time highs as gold also continues to flirt with record highs.
Just like gold, which has pulled lower after touching record highs of $1980, Bitcoin is also behaving the same. A pullback to the $10,000 level according to Vays could be crucial to Bitcoin bouncing back and rallying to a new all-time high
Federal regulators in the U.S ruling that banks can hold cryptocurrencies is another development likely to support a further upswing in Bitcoin prices. Bitcoin finding its way into the mainstream financial system marks a major milestone in cryptocurrency evolution. Banks and other financial institutions are likely to ramp up investment in the space a development likely to support crypto prices.
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