Gold and Bitcoin Reach New Milestones as Investors Seek Alternatives
As the U.S. equity market approaches new highs, both gold and bitcoin are experiencing significant gains. Spot gold reached a record high above $2,100 per ounce, while bitcoin briefly surpassed $42,000 to hit its highest level since April 2022. Bitcoin has seen more dramatic gains this year, rising over 150%. According to Joel Kruger, a market strategist at LMAX Group, the digital currency has broken through key technical levels and could continue to rally throughout the rest of the year.
The Potential Approval of New ETFs Drives Excitement Around Bitcoin
A major driver behind the renewed interest in bitcoin is the potential approval of new exchange-traded funds (ETFs). The Securities and Exchange Commission (SEC) has historically opposed such funds but recently lost a court case against Grayscale, which aims to convert its Bitcoin Trust into an ETF. The SEC met with Grayscale and BlackRock last week regarding their bitcoin ETF applications, leading many in the financial industry to anticipate an approval early next year.
A Bitcoin ETF Could Open Up New Demand for Crypto
Gautam Chhugani, a digital assets analyst at Bernstein, believes that the arrival of a bitcoin ETF could create new avenues of demand for cryptocurrencies. A bitcoin ETF would allow easy access to bitcoin through traditional financial channels, making it a more popular asset among investors. Chhugani expects that up to 10% of bitcoin’s supply could be managed by ETFs by the end of 2028, amounting to $300 billion in assets under management.
Treasury Yield Tumble Boosts Bitcoin’s Appeal
Another factor favoring bitcoin is the recent decline in Treasury yields. Historically, bitcoin has traded similarly to high-growth tech stocks, which perform well when interest rates are low. However, bitcoin’s correlation with tech stocks has weakened in 2023, making it an attractive uncorrelated asset for portfolio managers.
Gold’s Upside Potential Amidst Economic Downturn Concerns
The tumble in bond yields is also benefiting gold, albeit for different reasons. Gold is viewed as a defensive asset and investors may be turning to it as protection against a potential economic downturn in 2024. Citigroup’s commodities outlook predicts increased demand for gold and silver as hedges against downside risks in developed market equities and property. The bank remains bullish on gold and expects it to reach $2,150 per ounce.
Hot Take: Gold and Bitcoin Surge as Investors Seek Safe Havens
Both gold and bitcoin have reached new milestones as investors seek alternatives amidst uncertain market conditions. The potential approval of new bitcoin ETFs has generated excitement and could open up new avenues of demand for cryptocurrencies. Additionally, the recent decline in Treasury yields has made bitcoin an attractive uncorrelated asset, while gold is being sought after as a defensive hedge against a possible economic downturn. Despite a slight retreat in prices, both assets are still experiencing significant gains this year.
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