Gold hits all-time high – Why can’t Bitcoin hold on to its gains?

While gold Hit Although the price increase reached new highs, the often touted “digital gold” could not keep up.

Bitcoin proponents have long claimed that the unique selling point of the cryptocurrency is that it is a long-term store of value, just like the precious metal. And the largest and oldest virtual coin has in the past cut like gold.

But that is not the case at the moment. Gold hit a new all-time high of $2,483 an ounce today as geopolitical instability – particularly in the Middle East – and hopes of an imminent interest rate cut by the US Federal Reserve have increased demand for the shiny commodity.

Meanwhile, Bitcoin Volatility is increasing rapidly And its price is 17% below the all-time high of $73,747 it reached in March. Why?

Bitcoin supporters like Caitlin Long, CEO and founder of Custodia Bank, previously said that in times of uncertainty, more investors flock to the largest digital coin because it is a scarce asset – with only 21 million bitcoins produced in total.

But that may was briefly the case During the banking crisis in 2023, when Bitcoin’s correlation with technology stocks fell, this is not the case now.

“I think what we’re seeing here is that investors aren’t getting into Bitcoin yet in times of uncertainty,” said Kaiko research analyst Adam Morgan McCarthy Decrypt.

“In April (during the escalation of conflict in the Middle East) it failed to attract safe-haven flows, this has happened again now, and in times of heightened market tension it is more often correlated with equities.”

Greg Magadini, director of derivatives at Amberdata, added that while there should be a correlation between gold and Bitcoin, there are other forces at play: the US election in November.

The Republican frontrunner Donald Trump has come out as a crypto-friendly candidate – at least more than Kamala Harris of the Democratic Party. But as the chances of Harris becoming the next US president have increased, speculators have pointed to a less friendly regulatory environment for the crypto sector.

“In theory, inflationary forces pushing up the price of gold would likely help the price of bitcoin higher as well, although Democrats are pessimistic about cryptocurrencies, which may explain last week’s price divergences,” he said, referring to bitcoins major slump just a few days ago.

Bartosz Lipinski, CEO of trading platform Cube.exchange, said that more market factors need to change before Bitcoin truly becomes “digital gold.”

“Yes, volatility has evened out compared to previous market cycles, but the asset class still has a long way to go in terms of adoption, liquidity and even a more diversified futures market if we are to consider these assets even remotely similar,” Lipinski said. “Until then, it would be logical to continue to see differences in performance.”

And this week will be crucial for investors, said CryptoQuant analyst Burak Kesmeci. Federal Reserve Chairman Jerome Powell will speak on Friday – and his hints about future interest rate moves will be crucial for investors.

“As recession risks intensify and investors lose confidence in Bitcoin’s ability to maintain its value, We could see a further weakening of this correlation (between gold and bitcoin), which could potentially lead to increased volatility in the bitcoin price,” he said.

Edited by Ryan Ozawa.