Gold outflows are pushing Bitcoin larger
According to several experts, one possible reason for Bitcoin’s remarkable recent surge in price is the massive outflow of investors from another popular inflation hedge: gold.
Spot gold fainted last week, falling 4.62% to $ 1,857. The asset had previously risen in line with Bitcoin, up over 40% from last week’s lows of $ 28,000.
In a tweet on Friday, Charlie Morris, founder and CIO of ByteTree Asset Management, said the decline in gold prices may have been due to investors switching to Bitcoin:
With bond yields rising and inflation expectations lower, #gold has taken a hit. This warrants a $ 50 sell-off, but the price is down $ 120. I would attribute the excess to the rivers moving towards #Bitcoin pic.twitter.com/qsWBb8NaXA
– Charlie Morris (@AtlasPulse) January 8, 2021
Also earlier this week, Jim Cramer, host of CNBC’s Mad Money, said that gold ETF outflows are “all going into crypto.” Tracking inflows and outflows from Grayscale’s Bitcoin investment trust and gold ETFs support this claim, as Grayscale has dwarfed gold:
Bitcoin’s competition with gold has already begun, as evidenced by inflows of> $ 3 billion into Grayscale Bitcoin Trust and outflows of> $ 7 billion from gold ETFs since October, JPM says: Competition with gold as an alternative Currency will continue when the millennials are past time more important. pic.twitter.com/lkXmDIN9e4
– Holger Zschaepitz (@Schuldensuehner) January 4, 2021
The moves could be a sign of Bitcoin’s rising status as a legitimate asset class. Gold and Bitcoin have long been linked as both are viewed as a means of protecting wealth from inflation and macroeconomic uncertainty. However, if price movements over the past week are any indication, Bitcoin may win the narrative race.
In an interview with Bloomberg, Frank Spiteri, Chief Revenue Officer of Coinshares, said the narrative of Bitcoin as an inflation hedge “in the face of a highly unconventional monetary policy environment” is growing in importance.
“It seems we are in the midst of a simultaneous awakening from bitcoin to bitcoin as the uncorrelated store of valuables,” he said.
The observations from experts come after a unique flippening earlier this week: As of Friday, a single Bitcoin will be worth more than a 20-ounce gold bar.
Despite all of the declining price moves and the rise of Bitcoin, certain high profile gold bugs are refusing to move in their positions. In a tweet yesterday, longtime Bitcoin skeptic and gold investor Peter Schiff claimed that once investors “understand” the risk of inflation, they will return to bullion:
Today’s weak economic data on jobs is leading investors to buy risk-weighted assets and sell safe havens like #gold. The weaker the economy gets, the more money the Fed prints to support it. So the real risk is inflation, and once investors understand this, they will seek safety in gold.
– Peter Schiff (@PeterSchiff), January 8, 2021