Despite US share markets slowly unravelling their post-election gains, bitcoin has continued on its upwards rally.
In fact, the crypto asset has been on a more than steady incline since early November, flirting with US$93,000 and up 4.18 per cent over the last week.
Notably, analysts are pointing to the “digital gold” as potentially syphoning capital away from physical gold, which dipped below US$2,570 per ounce on Wednesday.
Speaking to InvestorDaily, AMP chief economist Shane Oliver agreed that the likes of bitcoin, particularly since Trump’s election victory, have seen a “unanimously positive” response.
This comes as US shares experienced a significant setback last week as the Trump trade lost momentum and the prospect of slower Fed rate cuts gained traction, with the S&P 500 erasing more than half of the gains it had made since the election.
“The share market’s deciding that it’s a lot more complicated perhaps than first thought, and that’s why it got a few wobbles last week, particularly later in the week,” Oliver said.
In contrast, crypto assets have stayed intact.
“I think that’s a classic case of technicals,” Oliver said. “There was a downtrend from the high, which was reached in March, that broke in anticipation of Trump being re-elected. And then it’s been spurred along by confirmation that Trump won.
“It’s probably also stealing money from gold, which has wobbled a little bit. I think it peaked in late October, whereas gold’s been under downward pressure.”
Since then, the economist said, it’s been a “classic crowd phenomenon” for bitcoin.
Similarly to Oliver, market economists in recent months continue to point out the characteristics that gold and bitcoin share.
“They’re both seen as hedges against governments confiscating the value of your paper currency by taking it off you or depreciating it via inflation,” he said.
Even this week, BTC Markets CEO Caroline Bowler pointed out that nations are increasingly exploring cryptocurrencies, like bitcoin, as reserve assets, with the US leading the way.
“The Pennsylvania House of Representatives is pushing to hold bitcoin as a reserve asset, positioning it as a store of value akin to gold. While unconventional, it highlights growing recognition of cryptocurrencies as a legitimate asset class,” Bowler said.
As such, Oliver highlighted that investors, including those who would have otherwise injected capital into the yellow metal, are now opting for exposure to bitcoin’s success.
“I think what’s happening right now is that bitcoin is taking money away from gold. So investors who would have gone to gold are saying ‘OK, we’ll go to bitcoin’. That probably suggests bitcoin can go quite a bit higher,” he said.
Like other economists, however, Oliver said not to confuse the two assets as “perfect substitutes” for one another.
This week, Coinstash co-founder Mena Theodorou also suggested that bitcoin could reach six-figure prices in the “near term.”
But driving this rally, Theodorou revealed, was an influx in institutional activity, including US$5 billion in single-day volume for BlackRock’s spot bitcoin ETF last week, driving total bitcoin ETF volumes past US$7.4 billion.
“BlackRock’s bitcoin ETF has now surpassed its gold ETF in size, highlighting the mindset shift amongst investors towards bitcoin as ’digital gold’,” he said.
“This surge underscores bitcoin’s transition from a speculative asset to a cornerstone of institutional portfolios, further solidifying its status as a modern store of value.”
