After a notable surge, gold’s valuation has started to drop. In contrast, Bitcoin (BTC) seems to be undergoing a minor capital rotation towards it, as seen in Tuesday’s price actions, which brought the price back to the $112,000 level.
In this scenario, asset manager Bitwise has published a new report that discusses the optimistic price outlook for the leading cryptocurrency, despite the hurdles it has encountered in recent weeks.
How Gold’s Gains Open Doors for Bitcoin
Written by Andre Dragosch, Max Shannon, and Aayush Tripathi from Bitwise Europe’s research and analysis team, the report underscores that crypto valuations have lagged behind conventional assets, primarily due to a bearish market mood sparked by recent weaknesses in US regional bank stocks.
It notes the variable performance of Bitcoin in relation to gold, which is influenced by fluctuations in cross-asset risk appetite. A renewed risk-on environment could reinforce Bitcoin’s dominance over gold’s performance.
A crucial driver of Bitcoin’s resurgence in the coming months may arise from this capital rotation. Gold’s remarkable ascent this year has been fueled by expectations of looser monetary policy and rising concerns about US fiscal debt.
According to Bitwise, even a modest capital shift of 3% to 4% from gold to Bitcoin could have a substantial effect on the cryptocurrency’s price, potentially doubling its worth, as illustrated in the chart below.
Interestingly, if 5% of investments move from gold to Bitcoin, its price might surge by over 126%, reaching $242,391. This prediction is based on a baseline price of $107,240, which represents Bitcoin’s value at the time of Bitwise’s report.
Why Is $118,000 Crucial for BTC’s Prospects?
Historical trends indicate that Bitcoin’s performance leadership could re-emerge in a risk-on environment. This potential change isn’t just speculative; the report highlights a similar occurrence in 2020 when Bitcoin started its climb to new all-time highs in October, coinciding with a halt in gold’s rally that had begun in July.
The analysts believe this performance pattern might be repeated, especially if gold’s rally comes to a stop. They emphasize that maintaining gold’s ascent usually necessitates a considerably larger capital influx compared to Bitcoin, posing potential challenges for gold’s ongoing performance.
Finally, on-chain analysis points to a strong liquidity cluster between $93,000 and $118,000, delineating a critical boundary between bullish and bearish market states. The report indicates that a decisive move above the upper end of this range at $118,000 could trigger a new price rally.
Featured image from DALL-E, chart from TradingView.com
