Bitcoin vs. Gold: Which Commodity is 2024's Winner?

Gold prices fell as the dollar gained from Donald Trump's rhetoric about the greenback as a global reserve currency.

The price of gold, which fell nearly 3% last week, was trading at about $2,630 per ounce.

As political unrest escalated in France, the dollar strengthened versus the euro, and the yen fell as US Treasury rates rose in tandem.

Since gold does not pay interest, a stronger dollar drives up its price for buyers using foreign currencies, while higher rates have the opposite effect.

The weakening demand for safe-haven assets, which led to gold's decline last week, came after a US-brokered cease-fire agreement between Hezbollah and Israel went into force last week.

Gold and other safe-haven assets are still in demand due to concerns that Russia's confrontation with Ukraine might escalate.

Due to increased geopolitical and economic threats, central bank purchases, and the US Federal Reserve's monetary easing cycle, the price of precious metals has risen by almost 30% this year.

Last month, two prominent financial firms — Goldman Sachs and UBS Group — issued positive outlooks, suggesting that some analysts anticipate new milestones in 2025.

However, gold is also taking a hit, while Bitcoin is gaining traction from Trump, who was sceptical of cryptocurrencies at first but is now an outspoken supporter.

He has pledged to build a national stockpile, which is likely to be funded by the over 200,000 Bitcoin that the government now has as a result of asset seizures.

Market watchers are on the edge of their seats, awaiting any sign that he would support Senator Cynthia Lummis's measure to sell Fed gold certificates to acquire 1 million Bitcoin to add to that stockpile.

Investors who are pursuing the token's price higher and higher, with predictions for it to reach $500,000 or even $1 million, are already taking a risk due to the enticing promise of a US strategic Bitcoin reserve.

The Federal Reserve has enough gold on paper to buy a suggested quantity of Bitcoin worth over $100 billion, or almost $690 billion at today's market values.

If Trump and Congress begin to back the Lummis bill, though, those figures are sure to alter significantly: In the same way that the price of gold would fall if the government announced intentions to sell a lot of it, the price of Bitcoin would rise if such plans were announced.

Nevertheless, there is no assurance that Trump will be able to amass the necessary quantity, much less that Congress will approve a measure to exchange a precious metal that has served as a reliable medium of exchange for a digital currency that is fifteen years old and is notorious for its wildly fluctuating values and association with con artists.

According to trading on the crypto-based predictions site Polymarket, a Bitcoin reserve is only 28% likely to be formed in Trump's first 100 days.

Even if the reserve is established and more acquisitions are authorised, the dangers can intensify over time.

Nevertheless, during the current honeymoon phase, when the market anticipates Trump's arrival and a new Congress, it is difficult to locate many investors who are pessimistic about Bitcoin's near future.

Remember that the value of this asset has skyrocketed from 5 cents in 2010 to almost $100,000 today and that exchange-traded funds have mitigated the perceived danger of investing in a crypto-native firm like FTX — which went bankrupt in 2022 and sent shockwaves through the cryptocurrency market — to a large extent.

With the market's institutional whales' wallets getting fatter and fatter, there need to be more sellers to keep prices from skyrocketing, particularly among the original Bitcoiners who are hesitant to sell.

Then there's the unknowable fraction of Bitcoin that will remain in circulation forever when people lose track of their passwords or the hard discs that store their Bitcoin wallet keys.

There is much conjecture that Satoshi has died, rendering those tokens worthless, as his wallet is said to contain 1.1 million Bitcoin.

A crucial component of the blockchain's architecture is the continuous reduction of the quantity of new Bitcoin to avoid the kind of inflation that affects countries with overly active money printers.

If the estimated demand from MicroStrategy and the potential US government stockpile under the Lummis bill materialises, it is projected to exceed the yearly growth in the supply of around 164,250 Bitcoin.

This amount is given to the computer operations known as miners, who safeguard the network.

Therefore, there are two sides to the risks that come from Bitcoin's new group of very concentrated owners.

Once dismissed as the wild fantasies of crypto zealots, many of the previously quoted exaggerated price predictions for the initial coin are now becoming more plausible.

For gold, though, the investor lens remains on global risks and geopolitical shifts, which seem to be centred around Trump. As. As such, Yellow Metal has been struggling to regain lost ground since the US election verdict.

Elsewhere

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In this episode, Takatoshi Shibayama sits down with Jason Choi, general partner at crypto prop shop ⁠Tangent⁠, for a candid exploration of crypto markets. Choi discusses meme coin supercycles, navigating macroeconomic headwinds, and the evolution of project evaluation from speculative hype to real-world traction.

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