Is Bitcoin Becoming the New Gold?

The launch of spot Bitcoin exchange-traded funds (ETFs) may have had a wider impact on cryptocurrency adoption than we thought.

Now that investors have started to move from gold to Bitcoin after the launch of the product, CEO of Ark Invest – Cathie Wood – says that ‘substitution’ of gold for BTC is now underway.

How accurate is that, though?

According to Wood, Bitcoin has been rising relative to gold.

“There’s now a substitution into Bitcoin and we think that is going to continue now that there is a less friction-filled way to access Bitcoin”, added ARK Invest CEO on February 4th.

 

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What does that exactly mean?

More people are now choosing in Bitcoin instead of other assets. This trend is expected to continue because it has now become easier for people to buy and sell BTC without facing as many obstacles or difficulties.

Hence, the process of switching from other investments to Bitcoin is becoming more common and accessible.

Similar to gold, Wood expects Bitcoin to prove itself as a “risk off asset” when the banking sector starts showing signs of weakness.

In simpler terms, what this means is that like gold, Bitcoin is anticipated to demonstrate its value as a safe-haven asset, especially when there are indications of instability or weakness in the banking sector.

The ARK Invest CEO said that the markets witnessed this firsthand back in March 2023 when the US experienced a regional bank crisis, which in turn, led Bitcoin’s price to shoot up 40%.

Now let’s get a bit more technical.

• A recent analysis by asset manager Fidelity shows Bitcoin’s correlation with gold increased in 2023.

• Bitcoin no longer showed its previous pattern of moving in the opposite direction to interest rates, even when rates were rising globally during that time.

• Simply put, Bitcoin’s behaviour changed, becoming more aligned with gold, and subsequently less influenced by changes in interest rates.

• The one-year rolling correlation between BTC and gold currently sits at 0.80 - highest it’s ever been.

Wood shared a chart of Bitcoin to gold ratio, which appears to show a strong, long-term uptrend. She says it reflects that BTC is now in the process of replacing the yellow metal.

• The price of Bitcoin has been holding steady around $42,000-$43,000 for the past week.

Did you know? Gold is often referred to as "yellow metal" due to its colour.

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