Key facts: Investors are seeking refuge in assets such as gold in the face of potential financial crises. The market, in general, continues to view bitcoin as a «risk asset.» The price of an ounce of gold reached USD 2,508, marking a new all-time high (ATH), while bitcoin (BTC), which some call «digital gold,» has not been able to keep up and is struggling to stay close to USD 60,000. There are several reasons behind the rise in gold. At the geopolitical level, the tension over a possible war between Iran and Israel threatens the stability of the raw materials market, especially the oil market. Something similar happened with the war between Russia and Ukraine and its repercussions on wheat prices. In economic terms, the Rumors of recession The stock market is still in a state of flux after the rise in unemployment figures in the United States was announced. Added to this are the bearish expectations shown by some stock market analysts. According to financial specialist Ronald Surz, stocks are no longer a safe place to invest and he has been insisting on calling on investors to get out of the stock market. Meanwhile, analyst Avi Gilburt foresees a long-term decline for major stocks, which, in his opinion, could be a bear market that lasts 10 to 20 years. To make matters worse, the stock market is still in a state of flux, Bank of Japan and its decision to raise interest rates from 0.1% to 2.5% This triggered a massive sell-off of assets. The rise in these rates made the “carry trade” strategy, which many investors used with the Japanese currency, lose profitability. This turned the stock market red on August 5, which was dubbed “Black Monday.”
Demand for gold is growing
The set of factors explained above motivates investors to move their capital towards assets that offer greater stability, even if the return may be relatively lower. While cash and US Treasury bonds are alternatives that are often used in economic scenarios like the current one, gold has topped this list for many years. Hence, the demand for gold by central banks has reached record levels during the second quarter of 2024, as BitcoinDynamic reported at the time.
Historical gold price chart. Source: TradingView. According to a World Gold Council (WGC) report from late July, total gold demand exceeded 1,200 metric tons between April and June, the highest amount since 2000, when the WGC began recording data.
If bitcoin is “digital gold” why is it not at ATH?
Many bitcoiners describe Bitcoin as the digital version of goldThe currency created by Satoshi Nakamoto has characteristics that can put it on par with gold. On the one hand, its supply is finite. The Bitcoin source code limits its emission to a total of 21 million units. It is also worth noting that the creation of new coins is done through a process known as mining, which requires high energy consumption by specialized equipment.
Industrial Bitcoin Mining Farm – Source: Lightfield Studios – stock.adobe.com All of this makes people compare bitcoin to gold. In fact, the cryptocurrency even has some advantages over the metal in question. Chief among them is its fungibility, as 1 BTC can be divided into 100 million satoshis. Bitcoin is also easier to transport and store than gold. A person can keep billions of dollars worth of BTC in an address that they can access from their mobile phone or with their cold wallet, which can be the size of a flash drive. Despite all of bitcoin’s qualities, the demand for this digital currency is not seeing a demand similar to that of gold these days. Quite the contrary, BTC has been struggling not to lose more ground since its ATH of over USD 73,000 that it reached in March of this year. As of this writing, the price of bitcoin is around USD 59,500. During Black Monday, this digital asset plummeted below $50,000. However, whales (investors who may have more than 10,000 bitcoins) have taken advantage of these drops to accumulate even more. Purchases by large investors and companies (either directly or through ETFs) have helped its price recover and remain close to $60,000 in recent weeks.
Bitcoin price is below its all-time high. Source: TradingView. The reason BTC is not marking new ATHs, like gold, is that, unlike the metal that many see as a safe haven, it is Bitcoin is still generally considered a risky asset.
Its price volatility is the main reason why there are still investors and financial analysts who classify BTC as a risky asset. However, it should be noted that, if one looks at its long-term trajectory, bitcoin has proven to fulfill its role as a store of value in the medium and long term.