Bitcoin as ‘Digital Gold’ Thesis Undermined by Crypto Selloff
Bitcoin has decoupled from gold’s price since last month
This year’s rally was mainly driven by new US Bitcoin ETFs
Tweet on BTC vs Gold
Bitcoin has decoupled from gold’s price since last month, mainly driven by new US Bitcoin ETFs#btc #gold pic.twitter.com/l8uMFJfHuX
— The_Journalbiz (@the_journalbiz) August 6, 2024
Bloomberg chart, BTC
As equities sank on Monday and carry trades unraveled, Bitcoin behaved more like stocks than gold, at one point tumbling 17% to below $50,000 before recouping some losses. Its correlation with the precious metal turned negative in July, data compiled by Bloomberg show.
The cryptoasset selloff is testing the industry axiom that Bitcoin is the equivalent of “digital gold,” and therefore belongs in an asset portfolio to hedge against stock market gyrations, like seldom before.
“It is unrealistic to think that institutional investors are allocating capital to Bitcoin for the same reason as gold,” said eToro analyst Josh Gilbert. “These two assets don’t play the same role in investment portfolios.”
Comparisons between Bitcoin and gold in part trace their roots to their respective scarcity. Just like there is a finite supply of gold underneath the Earth’s surface, Bitcoin’s blockchain is designed to automatically slow new token creation through a quadrennial process known as the halving. Ultimately, there will be 21 million Bitcoin in circulation.
