- Gold smashed a new all-time high, extending a 34% rally this year.
- Fed rate cut bets and geopolitical turbulence drive safe-haven demand.
- Bitcoin is still off more than 10% from its high.
Gold’s eye-watering rally is raising serious questions about how Bitcoin — and crypto more broadly — will behave in such a cautious macro environment.
That’s because, as gold recorded a new high above $3,500 on Wednesday, Bitcoin is more than 10% off its record high of $124,500 touched in August.
US President Donald Trump’s bellicose trade war, ballooning debt levels, and concerns that the Federal Reserve’s independence is under threat, has sent investors looking for answers.
And the $2.2 trillion cryptocurrency doesn’t appear to be a top choice.
While Bitcoin has a reputation among crypto pundits as a safe-haven asset, the correlation between the top cryptocurrency and gold has decreased over the past few weeks, Illia Otychenko, lead analyst at crypto exchange CEX.IO, told DL News.
“Bitcoin’s price has stalled under increased selling pressure from short-term holders, while gold has continued climbing amid uncertainty around what may happen next after a potential rate cut this month,” Otychenko said.
“This points to a market leaning toward greater risk aversion.”
Muted response
Indeed, other analysts suggest the recent divergence between the two assets makes crypto look a whole lot more like a traditional stock.
“Bitcoin’s muted response to gold’s breakout may suggest that, for now, it is behaving less like a hedge and more like a high-beta risk asset,” Joel Kruger, a market strategist at LMAX Group.
Still, there are signs that Bitcoin is also benefiting from investors’ appetite for safe-haven assets.
Investor rotations
Bitcoin exchange-traded funds have seen $774 million in inflows over the past week, tracking platform SoSoValue shows, a big contrast to the prior week when the products recorded over $1 billion in outflows.
At the same time, US spot Ethereum ETFs saw outflows of $135 million over the past week.
Ethereum doesn’t have the same reputation as a safe-haven asset.
Elsewhere Strategy, the largest corporate holder of Bitcoin, disclosed on September 2 that it had acquired another 4,048 Bitcoin for about $449.3 million at an average price of $110,981.
That takes the firm’s total holdings to 636,505 Bitcoin, purchased for nearly $47 billion at an average price of $73,765. At current levels, the pile is worth close to $70 billion.
Fed meeting
Next, investors eyes’ are all on the upcoming Federal Reserve meeting.
The US central bank is scheduled to hold the next Open Market Committee meeting on September 16, with markets anticipating a 89.7% chance of a rate cut, the CME FedWatch tool shows.
Lower rates tend to boost risk assets by reducing borrowing costs and pushing investors out of bonds.
“Expectations of U.S. rate cuts continues to support risk assets, with near-term focus on labor market data as a key catalyst,” Kruger said.
“It will be important to keep an eye on the US equity market, which has been showing signs of weakness. Any additional strain on this front could trickle down into crypto assets.”
Crypto market movers
- Bitcoin is up 0.9% over the past 24 hours to trade at $111,103.
- Ethereum is down 1.6% to trade at $4,321.
What we’re reading
- Trump-backed WLFI valued at $7.6bn — but only 24% of tokens are tradable — DL News
- Ethereum to Sunset Its Largest Testnet Holesky — Unchained
- Trump tariffs ‘illegal’? Now what? — Milk Road
- Crypto scandal sinks Russian elite’s $8.5mn polar party cruise — Financial Times
- Venus Protocol votes to liquidate attacker who stole $13m from victim — DL News
Lance Datskoluo is DL News’ Europe-based markets correspondent. Got a tip? Email at lance@dlnews.com.
