Today in Markets

Crypto Investors Go for Gold

Investors flock for Gold over Bitcoin.
Jack Inabinet Jack Inabinet Apr 16, 20242 min read
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market analysis Crypto Investors Go for Gold

Gold Fever. Escalating geopolitical tensions sent onchain degens flocking to gold this weekend. Why didn’t investors turn to BTC as a store of value, and why do they continue to ape precious metals?

As crypto market participants feverishly went risk-off and sought to position themselves to capitalize on the conflict, Paxos’s onchain representation of gold (PAXG) received a bid, ripping by over 40% to reach prices upwards of $3.3k per troy ounce on some exchanges.

With markets closed while projectiles flew on Saturday, issuers were unable to purchase the gold needed to create new shares, resulting in the monstrous price dislocations. 

Bitcoin’s primary appeal has always been its status as a store of value, but the token’s failure to act as such during this most recent crisis, coupled with acceptance among some onchain that gold is a superior SOV, was certainly a worrisome development for proponents of this feature.

While BTC is now down 16% off all-time highs and has continued to trade lower throughout the week, gold sits just 1.5% below its Friday ATH and has been strengthening since trading commenced on Sunday.

The relative valuation of BTC against gold peaked into high-timeframe resistance at 34 troy ounces per coin in mid-March and has aggressively slid throughout April, down 18% on the month.

Source: TradingView

Compared to gold’s eons-long track record as an SOV throughout recorded human history, Bitcoin’s decade-and-a-half track record is the blink of an eye.

Historically, investors seeking safety have gravitated towards gold and cash. The recent behavior of crypto investors turning to these traditional assets during periods of uncertainty, rather than BTC, suggests that even those within the industry view the token as a risk-on investment and can be susceptible to questioning its SOV properties.

Traders have blamed the decline on fears that WW3 is on the precipice of erupting, and while the latest eruption of conflict in the Middle East sent BTC/AU lower, the de-risking process has been visibly occurring over the past month.

Signs that market participants are fleeing towards safety are not indicative of bullish sentiment, and with previous tops in the relative valuation of BTC against gold marking the market’s transition into more risk-off phases, uncertainty looms about the future direction of the prices for risk assets.

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Jack Inabinet

Written by Jack Inabinet

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Jack Inabinet is a Senior Analyst with a passion for exploring the bleeding edge of crypto and finance. Prior to joining Bankless, Jack worked as an analyst at HAL Real Estate where he conducted market research and financial analysis for commercial apartment development and acquisition activities in the Seattle region. He graduated from the University of Washington’s Michael G. Foster School of Business and remains based out of the Seattle area.

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