In a remarkable turn of events, Bitcoin and gold have simultaneously reached record highs, sending conflicting signals about the global market’s risk appetite, as reported by Richard Henderson from Bloomberg News.
This apparently marks the first time the two assets have concurrently hit all-time highs since Bitcoin’s emergence more than a decade ago. Traditionally, gold has been considered a safe-haven store of value, while Bitcoin’s role beyond speculation remains a topic of debate.
According to Henderson, Bitcoin’s impressive 50% surge this year can be attributed to the influx of investments into recently launched US-listed spot exchange-traded funds (ETFs) that directly hold the digital currency. On the other hand, he says, gold’s rise could be interpreted as a defensive stance amid concerns about geopolitical tensions or a potential pullback in global stocks following an unprecedented bull run.
Chris Weston, head of research for Pepperstone Group Ltd., told Bloomberg News that the actions of short-term momentum traders across various asset classes can explain the seemingly contradictory behavior of Bitcoin and gold. Weston, as cited by Henderson, notes that both gold and Bitcoin are experiencing massive trading volumes, with fast-money investors buying into the momentum.
Henderson points out that both Bitcoin and gold are perceived as beneficiaries of anticipated looser monetary policy. He notes that swaps markets indicate a 62% probability of a Federal Reserve interest-rate cut in June, up from 58% at the end of February. He thinks this shift in expectations could be driving the surge in both assets.
Bitcoin reached a new all-time high of $69,210 (on Bitstamp) on Tuesday, surpassing its previous record set in November 2021 during the COVID-19 pandemic. However, the cryptocurrency later retreated to trade at around $66,160 as of 12:52 p.m. UTC on Wednesday. Meanwhile, gold bullion also hit a new peak of $2,141.79 an ounce on Tuesday, exceeding its previous high from early December. Henderson notes that the precious metal has gained almost 5% over the last five sessions.
Kyle Rodda, senior market analyst with Capital.Com Inc., told Bloomberg News that the cryptocurrency story can be linked to the broader risk-taking behavior in equity markets. Rodda points to the resurgence of meme coins as an indicator of irrational, risk-taking behavior, which aligns with the trends observed in certain segments of the equity market.
Featured Image via Pixabay
