The price of an ounce of gold hit $2,508, marking a new all-time high (ATH), while bitcoin (BTC), which some call “digital gold,” has failed to keep up and is struggling to stay close to $60,000.
There are several reasons behind the rise in gold prices. At a geopolitical level, tension over a possible war between Iran and Israel threatens the stability of the commodities market, especially oil. This is similar to what happened with the war between Russia and Ukraine and its repercussions on wheat prices.
In economic terms, recession rumours were revived after the rise in unemployment figures in the United States was announced. Added to this are the bearish expectations shown by some stock market analysts.
According to financial specialist Ronald Surz, stocks are no longer a safe place to invest and he has been insisting on calling investors to get out of the stock market. Meanwhile, analyst Avi Gilburt foresees a long-term decline for major stocks, which he believes could be a bear market lasting 10 to 20 years.
As if that were not enough, the Bank of Japan's decision to raise interest rates from 0.1% to 2.5% triggered a massive sell-off of assets. The rise in these rates made the "carry trade" strategy, which many investors used with the Japanese currency, lose profitability. This turned the stock market red on August 5, which was dubbed "Black Monday."
Demand for gold is growing
The set of factors explained above motivates investors to move their capital towards assets that offer greater stability, even if the return may be relatively lower.
While cash and US Treasury bonds are often used as alternatives in economic scenarios like the current one, gold has topped this list for many years. Hence, the demand for gold by central banks has reached record levels during the second quarter of 2024.
According to a report by the World Gold Council (WGC) in late July, total gold demand exceeded 1,200 metric tons between April and June, the highest amount since 2000, when the WGC began recording data.
If bitcoin is “digital gold” why is it not at ATH?
Many Bitcoiners describe Bitcoin as the digital version of gold. The currency created by Satoshi Nakamoto has characteristics that can put it on par with the golden metal.
For one, its supply is finite. Bitcoin 's source code limits its emission to a total of 21 million units. It is also worth noting that the creation of new coins is done through a process known as mining , which requires high energy consumption by specialized equipment.
Industrial Bitcoin mining farm – Source: Lightfield Studios
All of this leads people to compare Bitcoin to gold. In fact, the cryptocurrency even has some advantages over the metal in question. Among the main ones is its fungibility, since 1 BTC can be divided into 100 million satoshis.
Bitcoin is also easier to transport and store than gold. A person can hold billions of dollars worth of BTC in an address that they can access from their mobile phone or with their cold wallet, which can be the size of a flash drive.
Despite all of Bitcoin's qualities, the demand for this digital currency is not seeing a demand similar to that of gold these days. Quite the contrary, BTC has been struggling to keep from losing more ground since its ATH of over USD 73,000 that it reached in March of this year.
As of this writing, the price of bitcoin is hovering around $59,500. During Black Monday, the digital asset crashed below $50,000. However, whales (investors who may hold more than 10,000 bitcoins) have taken advantage of these drops to accumulate even more.
Purchases by large investors and companies (either directly or through ETFs ) have helped its price recover and remain close to USD 60,000 in recent weeks.
The reason BTC isn't hitting new ATHs like gold is that, unlike the metal that many see as a safe haven, Bitcoin is still generally considered a risk asset.
Its price volatility is the main reason why there are still investors and financial analysts who classify BTC as a risky asset. However, it should be noted that, if one looks at its long-term trajectory, bitcoin has proven to fulfill its role as a store of value in the medium and long term.
