- Gold surges to record $5,280 per ounce.
- Political turbulence fuels the rally.
- Yet Bitcoin and other cryptos lag behind.
Political chaos is driving investors to bet on gold as a safe haven asset, while Bitcoin fails to spark confidence, analysts say.
Worries about a US federal government shutdown and fiscal volatility have “weighed on Bitcoin,” Gabe Selby, head of research at CF Benchmarks, told DL News.
“Near-term bullish catalysts for Bitcoin remain intact but are increasingly political rather than monetary,” he said.
Selby’s analysis comes as the top cryptocurrency is significantly trailing behind other asset classes like stocks and precious metals, despite the broader macro fiat debasement trade many hope will propel Bitcoin.
Prediction platform Polymarket now projects a 77% chance of a US government shutdown. On Tuesday, Republicans rejected calls from Democrats to make changes to a funding bill for the Department of Homeland Security.
Gold topped $5,280 per ounce on Wednesday morning, and is up 85% in the past year. The S&P 500, widely seen as a barometer for the broader stock market, is also pushing new highs.
Meanwhile, Bitcoin, often dubbed “digital gold,” is failing to recover the $90,000 price. The cryptocurrency market as a whole is still down $1 trillion from its October record highs.
Here are three reasons why Bitcoin is lagging behind gold’s lustre.
Technical risks
Unlike gold, a scarce precious metal, Bitcoin is vulnerable to cyber-threats.
“Bitcoin is digital, making it potentially vulnerable someday to hacking by quantum-computing algorithms, while gold needs to be stored in a vault,” Ed Yardeni, president of Yardeni Research, argues.
Industry leaders have come out and flagged quantum computing as a serious technical challenge to Bitcoin.
Those voices include Coinbase, BlackRock, and Jefferies, which have all warned that Bitcoin’s security is heading into uncharted waters as quantum-computing technology nears.
David Duong, global head of investment research at Coinbase, has warned that one-third of all Bitcoin “appears vulnerable to long-range quantum attacks.”
Competition
Nearly 20,000 cryptocurrencies are listed by Coingecko — and that means competition for investors’ funds, analysts argue.
“There are lots of cryptocurrencies besides Bitcoin, which tends to influence the prices of its cousins,” Yardeni said. “Gold’s cousins include other precious metals, which can influence gold’s price,” he said.
And Yardeni is far from the only one who warns that Bitcoin faces competition.
Bloomberg Intelligence strategist Mike McGlone also argues that Bitcoin isn’t like gold because digital assets can be created with lines of code.
“Bitcoin was the first crypto in 2009,” McGlone wrote on LinkedIn in December. “But now it has millions of digital asset competitors.”
“By contrast, gold has just three competitors — silver, platinum and palladium,” McGlone said.
Debasement trade
Investor confidence in US assets has been rattled by President Donald Trump’s volatile policies. The dollar has slid nearly 2% against the euro in January, FX data shows.
On Tuesday, Trump told Bloomberg Television he is fine with the dollar’s decline.
A weaker currency means more competitive exports and manufacturing. But it has also incentivised investors to protect their portfolios and pour into safe-haven assets like gold.
Gold currently enjoys scarcity like Bitcoin, both as a store of value and tech component, Yardeni said.
To be sure, Yardeni said that gold’s “rapidly rising price will incentivize more mining, potentially adding to available supply.”
Crypto market movers
- Bitcoin is up 1.2% over the past 24 hours, trading at $88,889.
- Ethereum is up 2.8% past 24 hours at $2,991.
What we’re reading
- Gemini: EU lawmakers must listen to crypto industry or risk stifling innovation — DL News
- DefiLlama acquires OTC data purveyor Bulletin: ‘It’s a bit like truffle hunting’ — DL News
- Chinese-Language Networks Now Power a Fifth of Crypto Money Laundering — Unchained
- Raoul Pal: BTC’s turn is next — Milk Road
- What Bitcoin traders are focused on as Fed rate decision looms — DL News
Lance Datskoluo is DL News’ Europe-based markets correspondent. Got a tip? Email at lance@dlnews.com.
