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What is behind the unexpected synchronicity of Bitcoin and Gold in reaching record highs


March, 06 2024
watermark Economic news

The appearance of a rare phenomenon in the market — the simultaneous growth of bitcoin and gold to historical peaks, sends mixed signals about risk appetite, analysts say. 


These peaks were the first in the history of both assets since bitcoin appeared on the market more than a decade ago. The cryptocurrency rose to the level of $69 thousand, and gold – to the level of $$2,153 per ounce. However, if bitcoin is driven by a speculative desire for risk, then gold is, on the contrary, a tendency to hedge.


Bitcoin's 50% growth since the beginning of the year is explained by the influx of funds into newly created spot exchange-traded funds in the United States, which directly invest in this cryptocurrency. On the other hand, the rise in gold prices indicates a growing defensive strategy due to concerns about geopolitical tensions.


Experts believe that the right approach would be to consider the behavior of traders who hunt for short-term momentum across various asset classes. For example, if gold is actively sold in huge volumes almost overnight, then bitcoin buyers are driven by momentum.


Experts also note that both bitcoin and gold will be clear beneficiaries in the event of a softening of the Fed's monetary policy and a reduction in interest rates later this year.


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Foreign exchange trading carries a high risk of losing money due to leverage and may not be suitable for all investors. Before deciding to invest your money, you should carefully consider all the features associated with Forex, as well as your investment objectives, level of experience, and risk tolerance.