Bitcoin Breaks $90,000: Is Gold Losing Its Luster?

Bitcoin Breaks $90,000: Is Gold Losing Its Luster?Bitcoin breached the $92,000 mark on the evening of November 13th (Beijing time), setting a new all-time high and seeing a 4.05% intraday gain

Bitcoin Breaks $90,000: Is Gold Losing Its Luster?

Bitcoin breached the $92,000 mark on the evening of November 13th (Beijing time), setting a new all-time high and seeing a 4.05% intraday gain. Michael Novogratz, CEO of cryptocurrency merchant bank Galaxy Digital, believes that if Bitcoin were to become a reserve currency, its price could reach $500,000. However, he concedes that the likelihood of Bitcoin achieving this status is relatively low.

Over the past week, Bitcoin has repeatedly smashed its previous records. On Wednesday, following Trump's victory in the US election, Bitcoin surpassed $75,000 for the first time. On Thursday, the Federal Reserve announced a 25 basis-point rate cut, propelling Bitcoin further upward. It breached the $80,000 threshold on Sunday and reached a peak of $90,000 on Tuesday.

Market capital is pouring into Bitcoin. On January 10th, the first 11 Bitcoin spot ETFs were launched in the US, with a combined asset value of approximately $28 billion. This figure has nearly tripled to $82 billion. iShares Bitcoin Trust (IBIT), a Bitcoin fund managed by BlackRock, now stands as the ETF with the largest assets under management. On Wednesday, its trading volume hit a record $4.1 billion, followed by a net inflow of $1.1 billion the next day, marking the largest single-day inflow on record. Recently, IBIT's asset value surpassed that of the iShares Gold Trust (IAU), indicating a massive influx of capital into Bitcoin, while gold has experienced relative indifference.

The soaring Bitcoin price presents a stark contrast to the plunging gold price. On the day the election results were announced, gold prices experienced their biggest drop in over two years, falling by 3.93% in the past week. Crypto macro analyst Noelle Acheson believes that the Trump administrations adoption of more defined cryptocurrency regulations could steer some investors towards Bitcoin over gold.

As Bitcoin's price continues to scale new heights, the sources of capital behind it and the investment rationale are drawing attention.

Factors Driving Bitcoin's Surge:

• Market Capital Inflow: In recent years, traditional financial institutions like BlackRock and Fidelity have actively entered the cryptocurrency market, contributing to Bitcoins price surge.

• Institutional Investor Participation: Increasingly, institutional investors are incorporating Bitcoin into their portfolios, injecting large sums of capital into the market.

• ETF Launch: The launch of Bitcoin ETFs in the US has provided investors with a more convenient investment channel, further boosting market demand.

• Loose Monetary Policy: Major central banks around the world are implementing loose monetary policies, leading to rising inflation risks. Investors view Bitcoin as a tool for counteracting inflation.

• Risk Aversion: Amidst global economic uncertainty, investors are seeking safe-haven assets. As a digital gold, Bitcoin is attracting capital seeking shelter from risk.

Reasons for Gold's Cooling:

• Federal Reserve Rate Cut: The Fed's rate cut has lowered the investment value of gold, resulting in a decline in its price.

• Strengthening Dollar: A stronger dollar typically suppresses gold price increases, as gold is a dollar-denominated commodity.

• Bitcoin Competition: Bitcoin's rapid development and market value growth pose a certain degree of challenge to gold's position.

• Trump Administration Cryptocurrency Policy: The Trump administrations introduction of more defined cryptocurrency regulations might entice more investors to choose Bitcoin.

Can Bitcoin Become a Reserve Currency?

Novogratz's perspective suggests that the potential for Bitcoin to become a reserve currency remains, but the process could be lengthy. For Bitcoin to achieve reserve currency status, it must overcome the following challenges:

• Volatility: Bitcoins price exhibits significant fluctuations, and its instability could undermine its reliability as a reserve currency.

• Transaction Speed: Bitcoin transactions are relatively slow, making it difficult to meet the needs of large-scale transactions.

• Regulatory Gaps: Global regulations governing cryptocurrencies haven't been harmonized yet, and uncertainties in regulatory policies could affect investor confidence.

Outlook for the Future:

Bitcoin's future holds both opportunities and challenges.

• Regulatory Policy: Cryptocurrency regulations will continue to evolve around the world, bringing greater certainty to Bitcoin's development.

• Technological Advancements: With ongoing technological advances, Bitcoin's transaction speed and efficiency will improve, making its use as a reserve currency more feasible.

• Market Adoption: Bitcoin's market acceptance globally will likely increase, leading to greater adoption by businesses and individuals.

Disclaimer: This content is for informational purposes only and should not be considered investment advice. Investing involves risk, and caution is advised.

References:

• Visual China - VCG111482688101

• The Economic Information Daily

• The Securities Times - eCompany

Keywords: Bitcoin, cryptocurrency, gold, ETF, reserve currency, market funds, price trend, regulatory policy, future outlook