It’s been an exciting month in the world of cryptocurrencies and digital gold assets, as both Bitcoin and gold have surged to record highs. Tokenized gold assets have now surpassed $1 billion in market capitalization and the correlation between Bitcoin and gold has hit its highest point in over a year.
The rise in gold and Bitcoin’s collective value come as banks face turmoil and investors search for a safe haven asset to put their money in. While investors traditionally flock to gold during times of economic uncertainty, the emergence of cryptocurrencies has opened up new opportunities to gain exposure to the precious metal.
In lieu of traditional exchange-traded funds (ETFs) or storing gold bullion physically, investors are now turning to tokenized gold assets like pax gold (PAXG) and tether gold (XAUT) to gain exposure to gold without the high management fees. PAXG and XAUT boast a combined market capitalization of $517 million and $499 million respectively and have helped to push the value of tokenized gold assets over the $1 billion mark.
At the same time, Bitcoin has rallied to nearly $30,000 per coin as its correlation to gold reaches an all-time high. According to data by blockchain analytics firm Kaiko, the correlation between the two assets stands at roughly 50%. To put this into perspective, Bitcoin behaved more like the world’s most historic currencies in March, while its correlation to the stock market dropped to 20%, thus highlighting its potential to become a safe haven asset.
Former Coinbase CTO Balaji Srinivasan has gone as far as to stake 2 million dollars on the price of Bitcoin reaching $1 million due to the hyperinflation caused by the worsening banking sector. However, this prediction is doubtful, as even Saifedean Ammous, author of ‘The Bitcoin Standard’, doubts it will manifest.
On the cultural front, rapper Snoop Dogg stepped into the Wrestling Ring at WrestleMania 39 and was seen sporting a golden hardware wallet like a luxurious chain, indicating a growing crossover between gold and Bitcoin in public consciousness.
It is clear that gold and Bitcoin have re-aligned in the past month, largely due to the uncertainties plaguing the banking sector. Investors now have the option to gain exposure to gold without the burden of management fees or physical storage, while simultaneously taking advantage of the benefits of digitization offered by cryptocurrencies. Surely, Bitcoin’s potential as a safe haven asset will be tested in the near future and it would not be a surprise to see the correlation between gold and Bitcoin remain strong.
