- Bitcoin and gold rallied hard beginning Sunday.
- Bitcoin held its gains on Tuesday, while gold experienced a sharp drawdown.
- The divergent paths of Bitcoin and gold have sparked questions over what is happening behind the scenes.
Gold has long held the reputation of being an “anti-fiat” in financial markets due to its fiat-hedging properties. As Bitcoin rose to prominence, this same trait soon shone through, earning Bitcoin the title of “digital gold.”
Over the weekend, starting December 2, both commodities experienced significant rallies, with the precious metal hitting a new all-time high (ATH) on December 4. However, while Bitcoin held on to most of its gains from the surge, gold experienced a quick sell-off, leading analysts to wonder what happened.
Bitcoin Holds Steady, Gold Falters
Bitcoin breached the psychological $40,000 barrier on December 3, triggering a rally the next day that drove the leading cryptocurrency to an 83-week high of $42,400. Bitcoin retained most of its gains to close December 4 at $42,000. In contrast, while gold rocketed to reach a new ATH of $2,135/oz on Monday, sellers piled as the European market opened, forcing a 5% drop to close the day at $2,030.
Commenting on Bitcoin holding its gains, crypto investor Anthony Pompliano mentioned that BTC investors “don’t appear to have any interest” in taking profits off the back of the recent price gains. In further support of this statement, Pompliano drew on the “Percent of Supply Last Active” metric adding that 70.5% of coins haven’t moved in over a year.
Chiming in with their take on the divergent paths BTC and gold took on Monday, the Kobeissi Letter crunched the numbers to calculate that gold’s sell-off equated to a $675 billion drawdown, labeling the incident a “mysterious reversal.” Given the scale of the sell-off in absolute terms, the Kobeissi Letter questioned if this relates to a showdown between the two commodities or if something deeper is brewing behind the scenes.
Despite gold’s recent sell-off, the precious metal is still up 12% year-to-date (YTD) and 26% from November 2022 lows. Meanwhile, Bitcoin grew 150% YTD and gained 170% in value following the FTX-induced sell-off in November 2022.
On the Flipside
- Bitcoin and gold typically perform well in market uncertainty as investors seek safe havens.
- Gold is the established safe haven, while Bitcoin’s capped supply and apolitical nature resonate with those who fear the effects of money printing.
- Monday’s divergence between the prices of Bitcoin and gold suggests investors prefer the former.
- Bridgewater Associates Ray Dalio suggests asset appreciation during times of uncertainty is an “illusion” in that currency debasement is happening.
- Analyst Rashad Hajiyev predicts that gold will bounce back and move higher.
- Drawing on gold’s physical nature, Peter Schiff maintains that “gold is real, Bitcoin is fool’s gold.”
Why This Matters
Rather than seeing Bitcoin and gold as competitors, there is a case that both share an “anti-fiat” role for investors worried about currency debasement. As global uncertainty rises, both commodities offer alternatives to rapidly debasing cash. Their surprise price divergence may matter less than their long-run capacity to protect from the erosion of the money system.
Read about President Bukele’s response to Bitcoin critics as the leading cryptocurrency rallies into profit:
El Salvador’s Bitcoin Investment Records Profit Amid Rally
Find out more about Brian Armstrong’s take on Bitcoin and fiat co-existing here:
Bitcoin and Fiat Can “Co-Exist”: Coinbase CEO Armstrong Says