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Bitcoin outperforms gold by a significant margin in terms of price as expectations of a rapid global economic recovery made possible by promising coronavirus vaccines.
While the top cryptocurrency by market value rose 22% to surpass $ 17,000 this month, the precious metal only rose 0.5% to its current price of $ 1,890 per ounce.
Demand for traditional safe-haven assets like gold declined this month as two major pharmaceutical companies, Pfizer and Moderna, announced positive results for their experimental coronavirus vaccines.
The ensuing speculation that the global economy could return to normal as soon as the second half of 2021 triggered a rotation of money from defensive assets towards risky assets, according to forecasts by Ole Hansen, head of commodity strategy by Saxo Bank.
Bitcoin is also considered digital gold by many. However, the increased risk appetite in traditional markets and the record high of US equities have so far failed to hold back the bitcoin rally.
The cryptocurrency managed to maintain gains above $ 15,000 last Monday despite Pfizer news, and jumped nearly 5% to $ 15,885 yesterday, even as Moderna’s announcement strengthened equity markets. On both days, gold suffered significant losses.
Bitcoin’s resilience can be associated with strong holding sentiment and a shortage of supply. “Since bitcoin was at $ 11,400 a month ago, miners sold an average of 11 bitcoins per hour in exchanges. In comparison, 214 coins per hour were collected from exchanges,” Willy Woo, on-chain analyst and author of the newsletter “The Bitcoin Forecast”, he tweeted early Tuesday.
Moving forward, the odds look stacked in favor of rallies for both bitcoin and gold, as the US dollar is expected to weaken due to vaccine optimism and other factors.
Analysts from Citigroup and Goldman Sachs predict vaccine-driven dollar weakness in 2021, with the former forecasting a 20% drop in the greenback. The dollar index, which tracks the value of the USD against major currencies, is currently hovering around 92.30, representing a 4% drop from the start of the year.
Additionally, Goldman’s economics team predicts a temporary rebound in inflation, which could attract hedging offers for scarce assets like bitcoin and gold.
As of press time, bitcoin is trading close to $ 17,000, representing a 1.63% gain over the day.
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