Gold futures broke out to an all-time high on Sunday evening, coinciding with a 20-month high in the unit price of Bitcoin (BTC). These two assets have moved higher in tandem recently, benefiting from a broad weakening of the US Dollar throughout the past month – a currency that has been known to correlate inversely with both gold and Bitcoin. Potential rate cuts by the Federal Reserve are now being priced in by traders earlier than previously expected, strengthening these perceived hedges against currency debasement. Bitcoin and gold embody similar monetary qualities, but a significantly larger move higher in BTC throughout the year could be explained by several advantages the digital commodity may hold over the yellow metal.
Related ETFs & Assets: ProShares Bitcoin Strategy ETF (BITO), SPDR Gold Shares (GLD), Bitcoin (BTC-USD)
On Sunday evening, spot gold prices surged to an all-time high north of $2,150. That capped a 16.5% rally since the start of the year. At the same time, the unit price of the world’s largest cryptocurrency, Bitcoin (BTC), tapped $42,000 for the first time in nearly 20 months. That put Bitcoin’s year-to-date return at more than 153.0%.
Though BTC has obviously risen more steeply than gold throughout the year, due to its more volatile nature, their price appreciation has followed similar trajectories. MRP has long posited that gold and Bitcoin could very well be complementary assets in some situations, sharing very similar monetary qualities and the potential to benefit from similar trends. Earlier this year, BlackRock CEO Larry Fink lent credence to the “digital gold” narrative, stating that Bitcoin is “digitalizing gold” and “could revolutionize finance”. This was a massive stamp of legitimacy, considering BlackRock is the world’s largest asset manager, responsible for $9 trillion AUM in Q1 2023. Fink went on to add that “Instead of investing in gold as a hedge against inflation, a hedge against the onerous problems of any one country, or the devaluation of your currency whatever country you’re in – let’s be clear, Bitcoin is an international asset, it’s not based on any one currency and so it can represent an asset that people can play as an alternative.” BlackRock is one of the asset managers currently in the running to launch the US’s first spot-backed Bitcoin ETF, a race that MRP has highlighted in detail throughout this year.
One example of the Bitcoin-gold relationship played out earlier this year during the US banking panic that played out between March to May earlier this year – culminating in three of the four largest bank failures in US history. As trust was lost in banks throughout that period, investors apparently poured assets into Bitcoin and Gold to store their value and keep it remote from the next potential bank collapse. These commodities’ values shift constantly in Dollar terms, but both are always fungible – one unit of either Bitcoin or Gold is always equal to another unit of the asset. If investors…
To read the complete Intelligence Briefing, current All-Access clients, SIGN IN All-Access clients receive the full-spectrum of MRP’s research, including daily investment insights and unlimited use of our online research archive. For a free trial of MRP’s All-Access membership, or to save 50% on your first year by signing up now, CLICK HERE
