Bitcoin Now Evolving into a True Digital Gold, Shedding its Risky Asset Status

The Bitcoin breakout was just a matter of time. It is currently making a paradigm change, with BTC’s one-month correlation with gold rising 250% in 3 months while the one-month correlation with the S&P 500 has fallen 70% in just 20 days. Also, the US dollar’s pain is bitcoin and gold's gain.

It was last week that bitcoin stirred and this week, it is simply flying.

Over the weekend, we broke above the key psychological level $10,000 and extended these gains on Monday by breaking into a new 2020 high, crossing even $11,400 mark. Jeff Dorman, CIO at Arca said,

“This breakout was just a matter of time, as the inflation protection / store of value thesis was working everywhere else and Bitcoin was simply playing catch-up (gold at all-time highs, silver at 8-year highs, 2s/30s Treasury curve steepening, and tech stocks flying).”

For now, bitcoin retraced slightly and is currently trading around $11,000 on the back of strong volume — $4.25 billion worth of BTC exchanged hands in the past 24 hours, as per Messari.

These gains were recorded as the dollar experienced a slump and precious metals rallied bolstering the notion that cryptocurrencies could be a viable alternative to traditional monetary systems.

The world’s largest digital currency has surged nearly 25% since last week to the level last seen in August 2019. The rally accelerated after the coin breached $10,500, a level bitcoin failed to sustain in June and February. Matt Maley, chief market strategist at Miller Tabak + Co. said,

“It’s attracting the momentum players, and of course, the momentum players play such a big role nowadays that it’s giving Bitcoin the big move.”

A Paradigm Change

Bitcoin is starting to act like “digital gold” just as the yellow metal hits a new all-time high, climbing to $1,980. Both the assets are acting as a way to protect wealth from government actions like stimulus measures which are viewed as inflationary.

Interestingly, bitcoin’s one-month correlation with bullion has surged to +64.3%, up from -42.8% on April 27 while its one-month correlation with S&P 500 has fallen to 24.1% from the all-time high of 78.8% on July 8, as per Skew.

Senate Republicans have also unveiled their proposal for a new $1 trillion coronavirus relief bill that includes a second round of $1,200 stimulus checks, extended PPP, and unemployment benefits but at 70% of an individual's lost wages rather than the $600 weekly.

This is further propelling the dollar's slide which initially benefited from a flight-to-safety when the coronavirus pandemic first spread in March. Now, that the world’s focus is back to fundamentals, the world’s reserve currency has rapidly declined to a two-year low.

Besides, all the money the government is pumping into the system, the dollar is also pointing to the ultra-low interest rates well into the future, the prospect of mounting US deficits that has swollen to multi-trillions, and potential for inflation. Everyone is joining the dollar bearish party. Goldman Sachs’ team of analysts led by Jeffrey Currie said,

“Combined with a record level of debt accumulation by the U.S. government, real concerns around the longevity of the U.S. dollar as a reserve currency have started to emerge.”

The dollar has lost 4.9% against the euro in July, 2.5% against Yen, 6.4% versus the Swedish krona, and 4% to the New Zealand dollar. In the emerging markets, Mexico peso has risen 4.9%, Brazilian real is up over 6%, and China's yuan only 1% against the dollar this month.

Although the foreign exchange market is yet not trading on the presidential election, concerns of a Democratic winning are adding to the bearish sentiment on the dollar because of fears of higher taxes. And the dollar’s pain is bitcoin and gold's gain.

Bitcoin (BTC) Live Price

1 BTC/USD =$11,307.2086 change ~ 1.65%

Coin Market Cap

$208.62 Billion

24 Hour Volume

$5.59 Billion

24 Hour VWAP

$11.25 K

24 Hour Change

$186.5668

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AnTy
AnTy
AnTy has been involved in the crypto space full-time for over two years now. Before her blockchain beginnings, she worked with the NGO, Doctor Without Borders as a fundraiser and since then exploring, reading, and creating for different industry segments.

[Alert] Use the author's self-conducted information at your own risk, do you own research, never invest more than you are willing to lose.

[Disclosure] The published news and content on BitcoinExchangeGuide should never be used or taken as financial investment advice. Understand trading cryptocurrencies is a very high-risk activity which can result in significant losses. Editorial Policy \\ Investment Disclaimer

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