Even after publishing its worst month since 2016, gold still beat Bitcoin in the second quarter

Gold will outperform Bitcoin (Bitcoin) In the second quarter of 2021.

One ounce of gold soared from $1,707.45 on April 1 to over $1,750 during the trading session that was still running on June 30. This marks an increase of approximately 3.9% this quarter. At the same time, after reaching a high of nearly $65,000 in mid-April, Bitcoin has fallen more than 40% to below $35,000, all in the same period.

Negative correlation between Bitcoin and the gold market Specific soaring April and May 2021. JPMorgan Chase analysts pointed out in May that large institutional investors withdrew funds from the overvalued cryptocurrency market in order to seek opportunities for gold to rise.

When talking about the Bitcoin futures data of the Chicago Mercantile Exchange (CME), analysts at JPMorgan Chase said that investors have been liquidating positions since October 2020. At the same time, funds flowing into gold exchange-traded funds have also increased market outflows with the increase of Bitcoin. An excerpt from the report is as follows:

“Bitcoin flows continue to deteriorate and indicate that institutional investors will continue to tighten. In the past month, the Bitcoin futures market has experienced the steepest and more sustained liquidation since Bitcoin’s rise in October last year.”

In the first two months of the second quarter, the trends of Bitcoin and gold were almost inversely proportional. Source: TradingView.com

The bank pointed out that institutional investors may have regarded Bitcoin as an overbought asset, especially when the flagship cryptocurrency surged from USD 3,858 in March 2020 to slightly less than USD 65,000 in April 2021. 1,584%. At the same time, gold reached a high of US$2,075.82 per ounce in August 2020, and then fell to a low of US$1,676.866 per ounce in March.

Risk aversion

This Rotating investment strategy from Bitcoin to gold After Elon Musk criticized the carbon footprint of cryptocurrencies, he also gained momentum so much that he time out Accept it as payment for his Tesla electric car series.

On May 19, just after Musk stepped up his attack on the Bitcoin market, stating that he might let Tesla unload its entire $1.5 billion BTC reserves, Bitcoin plummeted by about 30%.After China announced a total ban on cryptocurrency activities, bearish bias has also increased, including Mining related business This contributes a large part of the total computing power of the Bitcoin network.

Bitcoin fell by 35.5% at the close of the trading day in May. On the other hand, gold benefited from the FUD in the cryptocurrency market, rising 7.6% during the month.

Investors choose gold instead of Bitcoin as a safer haven because they fear that inflation is about to rise. Therefore, as the US consumer price index rose to 4.2% at its best momentum in more than a decade, precious metals soared 3.78% in April. Next month-as mentioned above-gold continues to rise, while the consumer price index also shows a similar upward trend, soaring to 5%.

Core PCE is the Fed’s preferred indicator for measuring inflation. The annual rate in May jumped to 3.4%, the highest level in 29 years.

Fed Chairman Jerome Powell seems to be firm on rising inflation because he called price increases “temporary in nature.” He further emphasized that the central bank will maintain its expansionary fiscal plan to protect the US economy from the economic consequences of the coronavirus pandemic.

The Federal Reserve has kept interest rates close to zero and has purchased US$120 billion worth of government bonds and mortgage-backed securities every month since March 2020.

Bloody June

June seems to be the only month in the second quarter where Bitcoin and gold are trending simultaneously.

Bitcoin and gold formed a positive correlation with the Fed’s surprisingly hawkish tone in June. Source: TradingView.com

In the days leading up to the two-day policy meeting of the Federal Open Market Committee in the second week of June, asset transactions were flat. Fed officials announced that they may raise interest rates twice before the end of 2023, one year earlier than expected, in order to control the excessively high inflation rate.

After the Fed’s hawkish tone, both Bitcoin and gold fell. Gold is particularly focused on the prospect of recording its monthly value performance in June since 2016. It was down 7.42% at the time of publication.

At the same time, Bitcoin has fallen by more than 8.5% over the same period.

What is the next step for Bitcoin and gold?

A survey of leading economists conducted by the Financial Times found that most of them expect the Fed to raise interest rates at least twice before the end of 2023, which is exactly the same as the dot plot of central bank officials.

Economists expect interest rates to increase by 50 basis points by December 2023.Source: Financial Times

Commerzbank analyst Carsten Fritsch suggested that the US dollar should be watched in the next few trading days to gauge the strength of gold, and pointed out that the main drag on precious metals in June was due to the stronger US dollar.

The benchmark US dollar index, which measures the strength of the US dollar against a basket of major fiat currencies, rose to a one-week high of 92.433 on Wednesday.

Gold fell, and the U.S. dollar index hit a week high. Source: TradingView.com

“Gold has failed to break the 100-day moving average many times in recent days. This is a bearish signal,” Fridge Tell Bloomberg“So far, patient ETF investors will keep up with the trend and sell their holdings. This is risky. This will amplify the downward trend.”

At the same time, the Bitcoin bulls received similar warnings as the cryptocurrency repeatedly responded to the risk of falling below the $30,000 (psychological support level).

Jill Carlson, venture capital partner at Slow Ventures, Tell CNBC Institutional outflows from the Bitcoin market have gained momentum recently, adding that traders need to be “cautiously bullish” on cryptocurrencies.

Clem Chambers, CEO of the financial analysis portal ADFVN.com, Expected The other leg of Bitcoin pointed out that a drop below 30,000 USD would put the cryptocurrency on the path of 20,000 USD.

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