Bitcoin and Gold Are Both on Fire — but for Very Different Reasons

Estimated read time 4 min read
  • Bitcoin and gold have both been hitting new record highs.
  • The cryptocurrency is surging following SEC approval of spot ETFs and a looming “halving” event.
  • Central bank buying sprees seem to have powered the price of gold to surprising levels this year.

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Bitcoin and gold are moving in tandem right now, and both the digital currency and the precious metal hit new record highs last week.

Those gains have come during a relatively muted period for stocks, with the benchmark S&P 500 index up just 3% over the past month as investors try to figure out the Federal Reserve’s next move on interest rates.

Gold and what some call its digital equivalent are benefiting in different ways from an unusual macroeconomic environment where inflation and interest rates remain a top priority for the market, analysts say.

“I think it’s a coincidence, really — gold attracts certain people, and bitcoin attracts other investors,” Kathleen Brooks, research director at the online brokerage firm XTB, told Business Insider. “But these alternative asset classes are kind of where it’s at.”

“Several factors have driven the two of them to new records, but it’s really a quirk of the macro backdrop that they’re both rising at the same time.”

Bitcoin blitz

After a rough couple of years, bitcoin has kicked off 2024 on a tear. The token is trading above $73,000 and is up almost 75% since January 1, per a CoinDesk index that tracks its price.

That surge has powered it past its previous high of about $69,000 set in November 2021 at the height of the last crypto bubble:

In January, the Securities and Exchange Commission fired the starting gun on bitcoin’s stellar rally by approving 11 spot ETFs, which allowed a flurry of institutional investors to pile into crypto for the first time.

More recently, investor excitement has been building about an upcoming “halving event” that’s expected to take place in April. That will slash the reward for mining new blocks by half, which in the past has boosted bitcoin’s price by making supply scarcer.

“Spreading into the ETF space was massive for bitcoin,” Brooks said. “Past halvings have gone unnoticed — but that hasn’t happened this time, because bitcoin is so much more mainstream, and that should help keep up demand.”

Golden run 

Gold’s early 2024 run has been more subtle — but that’s a given when you’re dealing with an asset that investors tend to see as a “safe haven” defined by its low volatility.

The precious metal dipped slightly on Tuesday but is still up about 4.5% year-to-date at $2,159 per Troy ounce. That’s above the previous record high of about $2,140 reached in December:

Central banks from countries including China, Turkey, and India have all been on a gold-buying spree in recent months, helping to squeeze its price higher.

It appears they’re loading up to diversify their reserves, with other major holdings such as the US dollar tumbling as traders prepare for the Fed to start cutting interest rates.

“Gold is very much driven by central banks, without question or doubt,” Marc Ostwald, chief economist for ADM Investor Services International, told BI.

“They feel uncomfortable with the fact that they’ve got too much in the way of dollars in their portfolios. There aren’t many other alternatives, but gold is one of them.”

Analysts also believe that gold’s strong recent run has underlined its status as a haven for investors, with the wars in Ukraine and Gaza dragging on and stickier-than-expected inflation still fueling market jitters.

Bitcoin and gold are two of the hottest assets on the market right now — just for very different reasons.