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Mike McGlone, Bloomberg Intelligence’s Senior Commodity Strategist claims that the recent trend in which the price of gold has been increasing relative to the price of Bitcoin is significant and could continue for some time. He stated that the Bitcoin rollover risks lean toward deflation.
According to Bloomberg data, the price of gold was up about 10% year on year as of May 8, 2023, making it one of the top-performing major assets. In comparison, Bitcoin was down almost 20% during the same time period, while the S&P 500 remained relatively steady. This further reflects the present pattern of gold prices rising relative to Bitcoin prices.
Based on Bloomberg’s analysis, there is a correlation between the S&P 500’s peak and trough, its 100-week moving average, and the Bitcoin/gold ratio. Specifically, when the S&P 500 has been trading above its 100-week moving average, the Bitcoin/gold ratio has tended to be relatively high, indicating that Bitcoin is outperforming gold.
Conversely, when the S&P 500 has been trading below its 100-week moving average, the Bitcoin/gold ratio has tended to be relatively low, indicating that gold is outperforming Bitcoin.
However, it is worth noting that opinions on the future of both gold and Bitcoin can vary widely, and there is no way to predict with certainty how the disparity will evolve in the future. For instance, McGlone had once called Bitcoin the most significant asset in the world, following its performance at the time.
Factors Responsible for the Recent Gold and Bitcoin Disparity
There are various probable explanations for the Gold-Bitcoin discrepancy, including market sentiment, regulation, volatility, environmental concerns, and so on.
Bitcoin is subject to regulatory scrutiny, which can create uncertainty and caution among investors. For example, the recent bank run by US regulators following the collapse of banks such as Signature and Silicon Valley may have created uncertainty and caution among investors.
In contrast, gold is a well-established asset that is not subject to the same level of regulatory scrutiny. Also, the environmental impact of Bitcoin mining has been called into question, with some investors questioning Bitcoin’s long-term viability as a store of value.