Gold has recorded rises this month while cryptocurrencies are rapidly dropping. The divergence in direction has brought to the forefront the debate of whether the two assets are correlated.
Gold has reached its highest levels since October and prices have almost touched $1,900 per ounce. The rise can be attributed to the weaker dollar, falling inflation, and adjusted yields. It seems though that the recent rise in gold may have been caused by investors moving away from Bitcoin as they switched between the two assets.
On the other end, Bitcoin has plummeted by almost 40% from its $63,000 all-time high. The fall came after Elon Musk pointed out that mining for Bitcoin is not environmentally friendly. The statements compromised investors’ and institutions’ beliefs in the digital assets.
The link between gold and Bitcoin is still hard to determine. The connection between the two could be attributed to market psychology rather than real-money flows as indicated by gold’s recent rally due to concerns over price pressures and the weakening dollar.
Bitcoin has had high prices forecasts in the last few months that have been dampened by the major selloff. However, Mike McGlone, Intelligence Strategist at Bloomberg, who estimates that Bitcoin will reach $100,000, believes that crypto could one day become a digital reserve asset making investing in it worth the risk.
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