The impact of the economic crisis caused by the Covid-19 pandemic, has opened the possibility of a rally. The demand for gold and the massive purchase of Bitcoin by large investors opens the possibility for a large increase in these assets.
According to a study published by Bloomberg, the price of both Bitcoin and Dollar have all the conditions to shoot up. The only way, they explain, for Bitcoin not to go into an uptrend, is for something extraordinary to happen with the cryptocurrency.
The same forces that support a possible rise in the price of Bitcoin, could be the same that help gold. According to various analysts, there are numerous factors that could drive the rise.
Factors that could guide Gold and Bitcoin towards a bullish rally
According to an article published in Forbes on June 25, there are three main factors for the increase in the price of gold. These are, a possible inflationary escalation of the price of the USD due to the policies of the FED. Another factor is the uncertainty around the economy. Finally, the growing demand for physical gold is counted.
The price of gold and Bitcoin could be favored by two of the three factors mentioned. However, there are others, for example, fear of a second wave of the coronavirus, possible new tariffs in Europe, the trade war between China and the United States, among others.
This whole scenario could be considered as the perfect storm. The aforementioned Bloomberg analysis ensures that the only way for the price not to shoot is that “Something really bad happens to Bitcoin.”
The massive adoption of Bitcoin by institutional investors keeps the indicators positive. The historical behavior of the price of Bitcoin indicates, according to the study, that this year, its value should be around $ 20,000 USD per coin. The March crisis is perhaps the factor that has so far delayed this boom.
The Fed’s policies regarding the USD, the first engine of the possible rally
In a publication on the Morgan Stanley portal, Lisa Shalett, CIO of this firm, assures that the dollar could be close to a peak. This could be the main force in the hypothetical historical rally in the price of gold and Bitcoin.
“If the dollar weakens, this may indicate a good time for certain investors to consider adding some gold to their portfolios.”, Shallet explains, quoted in the article. In the same way, Bloomberg considers that the massive purchase of Bitcoin is a clear sign that “We have a digital gold”, before the current circumstances.
However, some analysts believe that the fall in the USD is not a certainty. Meanwhile, the US currency remains the dominant one in international markets.
The crisis caused by the measures related to the Covid-19 pandemic, pushed the FED to make exorbitant announcements about the printing of money. Those statements remain latent and threatening to investors. These do not take their riches to stake, so they seek to back them up as a safe asset. Gold and Bitcoin, in this case, are being the clear ones chosen to fulfill the refuge task.
Growth of appetite for gold and Bitcoin
The relaxation of measures that impeded trade have allowed the economy to start breathing again. At a slow pace, it continues to stabilize. But supply chains still suffer the consequences of the disruption, prompting commercial companies to fight to sustain their operations.
In that regard, Forbes cites Goldman Sachs regarding the need for a store of value. “Historically, gold demand rises amid lack of clarity during the early stages of economic recoveries”.
In summary, it can be considered that the start of a recovery cannot imply setbacks. Thus, fear of a possible recession in the US economy leads investors to consider gold and Bitcoin as a safe haven.
The other factors mentioned above fuel investors’ fears. For example, new confinement measures near Beijing, China, have sounded the alarm about a devastating second wave of coronaviruses among the already hit major world economies.
For its part, the trade war between the United States and China is a constant that hangs over investors. The Asian giant’s attempts to counter US sanctions, such as the launch of its Central Bank Digital Currency (CBDC), represent a serious challenge to the hegemony of the USD.
Gold and the main cryptocurrency are increasingly similar
The comparisons between gold and Bitcoin are the subject of great controversy. However, they are undeniable beyond the advantages and disadvantages of one over the other.
It can be said that there is an evident correlation between the two with the fact that the same factors cause similar results in them. Since the beginning of the year, institutional investors have not stopped buying Bitcoin. The Grayscale data is significant.
The growing demand for Bitcoin by institutional sectors, Forbes concludes, coincides with the increase in the correlation between this cryptocurrency and gold.
Some data to consider
- According to analyst and crypto-researcher Kevin Rooke, Grayscale added 53,588 BTC since Halving on May 11.
- Bitcoin’s historical behavior in 2016 indicates that its 2020 price should reach $ 20,000 USD.
- Gold’s base support is around $ 1,700 per ounce and Bitcoin’s around $ 9,000 per currency.
- Compared to oil and Nasdaq, Bitcoin’s performance is less volatile than in previous years. This represents maturity in the behavior of the cryptocurrency and the acceptance of Bitcoin at the same level as gold, by investors.
The information in this content has been extracted from reliable sources detailed below:
- Professional handling of content by the authors of CryptoTendency.
- External sources: bloomberglp.com, Forbes.com, and morganstanley.com.