Bitcoin Becoming Digital Gold, According to Bloomberg Analysis
Bitcoin’s price was back on the offensive Wednesday, climbing above $12,000 for the second time this week and sending a strong signal that the buyers were still in control. The largest cryptocurrency continued to outperform the broader market, as evidence by the rising dominance rate.
As it turns out, bitcoin is not only outperforming other cryptocurrencies, but is increasingly trading in lockstep with gold as investors seek refuge from global financial tumult.
The bitcoin price swung back above $12,000 on Bitstamp, eventually peaking at $12,145.42 through the morning session. At the time of writing, the BTC/USD exchange rate was up 5.3% at $12,072.
Price action and momentum are clearly on the side of the bulls, according to the daily chart. The cryptocurrency is also trading above the key $11,600-700 support region identified on Tuesday. This level had previously acted as a resistance.
At current values, bitcoin has a total market capitalization of $214.4 billion, where it accounts for 68.8% of the overall market. The so-called dominance rate hasn’t been this high in well over two years.
Trading activity has leveled off from Tuesday, when bitcoin’s price peaked north of $12,300. Over the last 24 hours, spot volumes on verified exchanges fell to $1.6 billion, according to Bitwise. Trade volumes reported by CoinMarketCap were more than ten times higher.
Bitcoin as a Safe Haven?
Bitcoin’s return to strength has been accompanied by a massive upsurge in the price of gold, as risk-off investors look to hedge their bets against central-bank easing and trade-war uncertainty. Gold’s price surged 1.8% on Wednesday, topping $1,500 a troy ounce for the first time in over six years.
As Bloomberg reported Wednesday, bitcoin’s correlation with gold has increased sharply in the past three months. Since May 8, gold and “digital gold” have moved in lockstep with each other 58% of the time.
Although Bloomberg acknowledged the limitations of its analysis, which was based on a 60-day timeframe, it said that the data should not be ignored.
“Sixty-six days of trading data may not be statistically significant, but that doesn’t mean this should be ignored. The evidence is growing that investors – rightly or wrongly – see Bitcoin as a refuge in times of turbulence.”
The last time bitcoin and gold moved together so consistently was three years ago when the United Kingdom voted to leave the European Union. Brexit was a paradigm-shifting event that triggered a massive slide in the British pound and drove investors away from risk assets, at least temporarily. This time, it’s a U.S.-China trade war and central-bank policy that have investors worried.
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock. Chart via TradingView.