Bitcoin, Gold's parallel all-time highs confuse markets

March 06, 2024 (MLN): Bitcoin and gold's simultaneous surge to all-time highs are sparking debate over the appetite for risk across global markets.

This is the first time that both the largest cryptocurrency and the yellow metal have reached their highest value at the same time since Bitcoin's inception over a decade ago.

Yet markedly different drivers are typically thought to move each asset, gold has acted as a haven store of value for millennia, while any Bitcoin role beyond pure speculation is hotly contested, says Bloomberg.

Bitcoin has climbed about 50% this year, amid inflows led by the spot Bitcoin exchange-traded funds (ETFs), a landmark moment for the industry that paves the way for new investors to get exposure to crypto.

Gold’s rise, however, could be taken to indicate defensive positioning on concerns about the perils of geopolitical tension or a possible pullback in global stocks in the wake of a record-breaking run.

One way to square the circle is to consider the behavior of traders who chase short-term momentum across asset classes, according to Chris Weston, head of research for Pepperstone Group Ltd.

“Gold has been hugely traded overnight, the volumes are massive, I’ve had a lot of client calls asking what is happening,” he said. Fast-money investors “are buying the momentum and that is what we are seeing in Bitcoin as well.”

Both Bitcoin and gold are viewed as beneficiaries of expectations of looser monetary policy.

Swaps markets show a 62% chance of a Federal Reserve interest-rate cut in June, compared with 58% at the end of February.

Bitcoin surged to a record $69,191.95 on Tuesday in the US, scaling the peak the token reached in November 2021 during the pandemic, before retreating to trade at around $64,000 as of 09:53am PST.

Bullion rose to a peak of $2,141.79 an ounce on Tuesday, surpassing the previous high set in early December. The precious metal has climbed almost 5% over the last five sessions.

“The crypto story can be tied in with what is happening in equity markets and broader risk taking,” said Kyle Rodda, senior market analyst with Capital.Com Inc.

“We’re seeing a resurgence in meme coins that suggests irrational, risk-taking behavior, which is consistent with what is happening in some parts of the equity market,” he added.

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