The "Trump Trade" Ignites Bitcoin Surge, Gold Breaks 50-Day Moving Average - Who's the Ultimate Winner?

The "Trump Trade" Ignites Bitcoin Surge, Gold Breaks 50-Day Moving Average - Who's the Ultimate Winner?On Monday, Bitcoin surged past $88,000, experiencing a dramatic intraday rally of over 11%. Bitcoin ETF trading volumes exploded, boosting confidence in the crypto market and fueling bets that this rally is just beginning, potentially extending all the way to Trump's inauguration

The "Trump Trade" Ignites Bitcoin Surge, Gold Breaks 50-Day Moving Average - Who's the Ultimate Winner?

On Monday, Bitcoin surged past $88,000, experiencing a dramatic intraday rally of over 11%. Bitcoin ETF trading volumes exploded, boosting confidence in the crypto market and fueling bets that this rally is just beginning, potentially extending all the way to Trump's inauguration. Bitcoin has surged over 25% since Trump's victory became apparent, leading to a significant increase in Bitcoin ETF trading volume on Monday. However, in contrast, gold, which has been shining brightly in recent months, exhibited a lackluster performance. Since the election, gold prices have plummeted, breaking below the 50-day moving average and approaching the critical $2,600 level, diminishing the excitement generated by the metal's record highs earlier this month.

$2,600 is a pivotal price point for gold, and the Bitcoin/Gold ratio is nearing its recent peak. Why has this sudden surge in Bitcoin and decline in gold occurred within a matter of days? Analysts believe that "Trump 2.0" may lean more towards "small government" ideology, favoring a "decentralized" asset like Bitcoin. This cautious fiscal approach also weakens gold's appeal as a safe-haven asset.

Bloomberg analyst John Stepek believes that Bitcoin's rise stems from the belief that Trump's governing style might favor a "small government" approach, characterized by reduced government intervention and spending, rather than the "big government" approach endorsed by Modern Monetary Theory (MMT), which advocates for expansionary fiscal policies to increase spending and stimulate economic growth. In this scenario, Bitcoin, as a "decentralized" asset, could stand to benefit.

A similar argument can be applied to explain the decline in gold. The market previously anticipated that Trump's presidency would automatically translate into higher fiscal spending and larger deficits, which served as a strong support for gold prices for a period. However, market expectations have shifted. Trump may not aggressively increase government spending and may even adopt a more cautious approach. This dampens gold's safe-haven appeal and reduces its attractiveness as a hedging tool.

Furthermore, according to Brent Donnelly, analyst at Spectra Markets, the recent US election highlighted the importance of addressing public concerns about inflation. Therefore, "Trump 2.0" might place a greater emphasis on inflation management, further weakening gold's demand and enhancing Bitcoin's appeal as an emerging asset.

The prevalence of the "small government" ideology could become a defining theme in the market landscape for the foreseeable future. This ideology will not only influence the Federal Reserve's monetary policy but also impact the economic policies of other countries worldwide. As a result, Bitcoin, a "decentralized" digital asset with strong anti-inflationary properties, holds promising potential for the future.

However, some analysts believe that Bitcoin's rally may be unsustainable. They point out that Bitcoin prices experience significant volatility, heavily influenced by market sentiment. Moreover, Bitcoin's trading volume remains far less than that of traditional financial markets, presenting liquidity risks.

Regardless, the emergence of the "Trump Trade" undoubtedly introduces new variables into the financial markets. Investors need to closely monitor policy changes and make investment decisions cautiously.