Bitcoin Is Eating Gold’s Market Share; US Dollar, SPX, & Tech-Heavy Nasdaq Are All Down

While digital gold experienced its nearly 30% drawdown this week after hitting a new ATH above $58,000 on Sunday, gold is stuck around $1,800.

The precious metal has been on a downtrend ever since it hit a new peak above $2,000 in August. During this time, the price of Bitcoin went from just under $12,000 to the current $48,900.

“To say that bitcoin is eating into the market share of gold right now would be an understatement,” wrote analyst Mati Greenspan in his daily newsletter Quantum Economics.

“Especially with interest rates and bond yields on the floor, gold, which bears no yield, seems all that much more attractive in comparison.”

According to Ceteris Paribus, had Bitcoin not been invented, gold might have gone to $3k, but of course, digital gold is here, and it has been capturing the institutional flows. Even the Citigroup analysts believe so.

Citigroup: “Gold is losing luster to cryptocurrencies”

— Dan Held (@danheld) February 23, 2021

In the macro environment, even the US dollar is falling today, going under 90. S&P 500 is also seeing a drop to 3,876.50, down nearly 1.5% from Friday high. The same goes for tech-heavy Nasdaq, which has slid over 3.1% to the current 13,533 during the same period.

Meanwhile, as we reported, the rates have risen after seeing an all-time low in August. Ever since then, it has been rising steadily. These rates are of significance because “the floor-low yield has been a big part of the current narrative of why portfolio managers should allocate to bitcoin,” said Greenspan.

Currently, around 1.362%, these yields on 10-year Treasury do not compare to Bitcoin’s gains, which despite the current losses, is still up more than 60% YTD. However, to Greenspan,

“The higher that rate goes, or is expected to go, the tougher it will be for stocks and cryptocurrencies to keep climbing as they are.”

But asset inflation persists, and investors continue to benefit. Although, for now, Bitcoin, along with the rest of the crypto market, is seeing a pullback after a wild rally from $29k, which was the last significant correction in late January.

While the price of Bitcoin went down to about $45,000, even if it goes back to $40,000, it would be a normal retracement in a bull market. Greenspan said,

“With the powerful narrative that bitcoin is good for hedge funds and multinational corporate balance sheets proliferating through the mainstream psyche, it certainly does seem more likely that this bull has more room to run, even if we are in for some volatility in the short-term.”

This means, for those wanting in on Bitcoin and other cryptocurrencies and believe they are going higher, it is the opportunity to buy them at discounted prices.