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Bitcoin lost numerous critical levels, and gold soared to new heights: This certainly wasn't in most traders' playbooks. It appears that gold is killing Bitcoin's momentum and becoming the true safe-haven asset.
Bitcoin is secured
Despite what short-term charts may indicate, the rally in gold may actually support Bitcoin’s long-term argument. With a clear break above the $3,500 resistance level, gold futures have completed a multi-month consolidation breakout. With bullish flashing momentum indicators, the move is supported by strong volume.
Historically, the demand for gold has been driven by inflation, geopolitical unpredictability and waning fiat confidence, all of which investors seem to be protecting themselves against. Bitcoin has found it difficult to stay competitive in this environment. Since failing to hold the $120,000 zone, Bitcoin has weakened and fallen to $107,000, breaking below its 50-day EMA.
On the surface, the divergence appears to be a zero-sum game in which Bitcoin loses as capital rotates into gold. However, the correlation isn’t as harmful as it first appears to be. Actually, the strength of gold only serves to strengthen the larger anti-fiat thesis that both assets are associated with.
Why Bitcoin loves gold
Bitcoin thrives on the narrative that hard assets are outperforming fiat currencies, which is reinforced by each new gold high. Despite the temptation for Bitcoin holders to see gold’s breakout as a danger, it actually makes Bitcoin more vulnerable to memes. Bitcoin proponents will once more highlight BTC’s greater upside potential in comparison to the boomer rock, if gold can firmly establish itself at $3,600 or higher.
The argument that Bitcoin’s eventual run could outpace gold’s measured gains is strengthened by the fact that the comparison gap widens as gold prices rise. Does gold kill Bitcoin? Maybe in the short term. The breakout momentum of gold is evident, but the Bitcoin charts appear fragile.
Long-term, however, the gold rally might just pave the way for Bitcoin’s story to gain momentum. Bitcoin owners shouldn’t worry just yet, because the race isn’t finished, even though the baton may have momentarily shifted to gold. This strange correlation is simply another chapter in the conflict between fiat money and hard assets.
Dan Burgin
Vladislav Sopov
U.Today Editorial Team