Bitcoin Price is decoupling from Gold

As the Bitcoin price recoils from around its all-time high, the digital asset is decoupling from gold. Unlike BTC, gold’s gains have been marginal, even negative. Meanwhile, the Bitcoin price has more than doubled in the last four months. BofA Global Investment Strategy data shows outflow from gold in the past week spiked last week while inflow to equities soared. 

Details: 

The Bitcoin price is trending at around late 2017 and early 2018 highs. While it is billed as digital gold given its properties, physical gold’s performance has been dismal. The asset has failed to close above $2,000, tanking in the past two weeks, and is underperforming Bitcoin. On the other hand, the BTC price has been on a tear. The divergence in performance points to a decoupling as it is emerging that different fundamentals may be driving the two safe-havens. Increasingly, Bitcoin is finding support from influential investors who claim the asset’s portability, fixed supply, and digital existence give it an edge over alternatives.

Impact on the BTC Price: 

Neutral. Divergences are normal and happen from time to time whenever there is a skew in investors’ preference. Whether it will be corrected depends on how Bitcoin performs in the medium term. A rally above $20,000 towards $31,000 will widen the gap as investors dump “stable” assets for volatile and high yielding vehicles like Bitcoin.

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