3 Impacts of Bitcoin Halving on Gold As Prices Soar

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In the past three months, gold prices have skyrocketed at an unprecedented rate, peaking at a record high of $2,431 on April 15. Conversely, Bitcoin‘s price surge came to a sudden end last weekend, causing a dramatic decline to around $60,000 across major cryptocurrency exchanges. Despite this drop in Bitcoin’s value and the subsequent panic selling within the crypto market, the upcoming halving event is set to occur on April 20.

The increasing value of the world’s priciest metal is a reflection of the escalating geopolitical conflicts in Europe over the Russia-Ukraine dispute and the Middle East due to Israel’s actions in Gaza and the growing tensions between Iran and Israel.

Despite a disappointing performance of cryptocurrency prices this week, Bitcoin’s upcoming halving could potentially bring about significant changes.

Currently, the price of Bitcoin staying above $60,000 is satisfactory for investors who anticipate a more significant surge following the halving event.

3 Impacts of Bitcoin Halving on Gold As Prices Soar

In 2024, the price surge of gold could be affected by the upcoming Bitcoin halving in some capacity. This article aims to explore the key factors affecting both gold and Bitcoin, providing valuable insights for investors looking to include these precious assets in their portfolios.

  1. Bitcoin Halving Driving The Scarcity Narrative

Gold’s worth lies in its scarcity: being a rare metal, it serves as a valuable asset for governments, keeping reserves in central banks and other financial institutions. Businesses such as hedge funds, fund managers, and even individuals invest in gold.

Over the past ten years, Bitcoin’s growing popularity as a digital equivalent of gold has led to increased competition. Institutions have responded by reducing their reliance on traditional assets and investing a small percentage (3% or 5%) in Bitcoin.

In just two days, Glassnode reported that investments in Bitcoin outperformed portfolios without such allocations, as the value of Bitcoin was cut in half during this period.

Based on blockchain analysis, introducing a small percentage of cryptocurrencies to a standard 60/40 investment portfolio significantly enhanced returns. A 3% investment in cryptos resulted in a return of 52.9%, while a 5% allocation brought about 67.0% returns – both figures far exceeding the traditional strategy’s 33.3% return.

During the period from April 2019 to March 2024, including a small percentage of cryptocurrencies in a standard 60/40 portfolio significantly enhanced returns. Specifically, a 3% investment in crypto resulted in a total return of 52.9%, while a 5% allocation brought about 67.0% returns – considerably more than the traditional approach’s 33.3% gains.

— glassnode (@glassnode) April 16, 2024

When Bitcoin undergoes a halving event, the supply of new coins being released is reduced by half. As a result, the scarcity of Bitcoin is anticipated to increase dramatically, potentially even surpassing that of gold. This optimistic perspective on Bitcoin may motivate investors to purchase more gold as a protective measure during economically challenging periods, particularly when inflation is rapidly rising worldwide.

2. Bitcoin Parabolic Rally Pre-Halving

In Q1 2024, the Bitcoin rally was primarily driven by surging interest in Bitcoin ETFs. The Securities and Exchange Commission (SEC) granted approval for these ETFs in January, leading to a significant increase in demand. Moreover, the anticipation of an upcoming Bitcoin halving event added excitement among investors.

With Bitcoin’s price surging before the halving event, some institutions holding Bitcoin began considering shifting their cryptocurrency gains into gold. This is due to gold being widely recognized as a valuable asset that maintains its worth over time.

While Bitcoin outperforms conventional investments on an annual basis, it’s important to note that it carries greater risk. As a result, some investors choose to protect their portfolios by adding gold as a hedge.

3. Geopolitical Tensions Ahead of Bitcoin Halving

Last year’s Israeli military response to Hamas attacks in Gaza has led to heightened tensions between Israel and Iran, which is causing concern among investors. With crypto markets poised for significant gains based on the bullish Q1 outlook, these geopolitical developments are an unwelcome distraction.

Despite the potential impact of the Israel-Hamas conflict, which could escalate with Iran’s involvement, the price trend of Bitcoin has been disrupted. Meanwhile, gold continues to surge steadily.

During economic turmoil, it’s common for investors to turn to safer, more stable assets like gold. While Bitcoin serves as a store of value, gold’s lower volatility makes it a more appealing choice during uncertain times. This perspective on gold has led many investors to purchase gold instead of holding Bitcoin prior to its halving event.

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2024-04-17 22:42