Bitcoin traders who are eagerly anticipating when the cryptocurrency will reach new all-time highs should pay close attention to the price movements of gold. Historical data from 2020 indicates that Bitcoin is likely to surge to new highs once the momentum of gold starts to wane.
Bitcoin, the dominant cryptocurrency based on market capitalization, has been fluctuating between $50,000 and $70,000 since April, facing limitations from various factors related to both the crypto industry and the broader economic landscape. During the same period, gold has experienced a spike of over 20%, hitting unprecedented levels above $2,700. This year alone, gold has seen a 37% increase in value, while silver has surged by 43%, reaching a 12-year high near $35.
In a similar pattern to 2020, gold led the way for Bitcoin’s rally. At the end of 2019, gold began its upward trajectory, surpassing $1,450 and eventually reaching a record high of over $2,000 per ounce in August 2020. Meanwhile, Bitcoin remained relatively stable, except for a sudden drop due to the COVID-19 pandemic, hovering below its previous peak of $20,000. However, as gold started to retreat towards the end of 2020, Bitcoin began its ascent, surging from $10,000 to over $60,000 by March 2021. This sequential movement suggests that Bitcoin waited for gold to reach its peak before making significant gains.
If history serves as a guide, a potential halt in the gold rally could pave the way for increased demand for Bitcoin. Nevertheless, it remains uncertain whether this historical trend will repeat itself, as there are currently no indications of a slowdown in gold’s uptrend or demand.
Recent reports suggest that the surge in gold prices has been fueled by substantial inflows into gold ETFs, with over 1 million ounces flowing in over a seven-day period, the highest since October 2022. The majority of these inflows were directed towards SPDR Gold Shares (GLD), a gold fund widely favored by U.S. retail investors, which has witnessed significant accumulation since July.
In a parallel trend, inflows into U.S.-listed spot Bitcoin ETFs have also increased. Data from Farside indicates that on October 23rd, net inflows totaled $192.4 million across various U.S.-based Bitcoin ETF products. iShares Bitcoin Trust (IBIT) received a substantial inflow of $317.5 million, bringing its total net inflow to $23.5 billion.
Despite the surge in inflows into both gold and Bitcoin ETFs, not all of these investments are intended for long-term holding. Sui Chung, CEO of CF Benchmarks, suggests that 60% of recent inflows are directional holding, while the remaining 40% is attributed to basis trades.
Traders are optimistic that Bitcoin prices will soar to new record highs once the U.S. election concludes. The intricate relationship between gold and Bitcoin movements provides valuable insights for investors seeking to navigate the complex dynamics of the cryptocurrency market.
As an experienced analyst specializing in Bitcoin and macroeconomics, James, a senior analyst at CoinDesk, emphasizes the importance of monitoring ETFs, spot and futures volumes, and flows to gain a comprehensive understanding of Bitcoin’s performance. His expertise in on-chain analytics and financial research equips him to provide valuable insights for traders and investors alike. Follow @btcjvs on Twitter for the latest updates on Bitcoin and cryptocurrency trends.
