By: Fiona Cincotta, Senior Market Analyst
Bitcoin has climbed 44% in a single quarter in which gold gained 8% and stocks rose around 3.5%. The Bitcoin debasement trade is not a story of investors abandoning gold, since gold ETF demand remains exceptionally strong, but of the same macro bet producing a much larger move in Bitcoin. Bitcoin's breakout coincided with U.S. Treasury Department plans to increase buybacks of long-dated government bonds and around $4.6 billion in net inflows into U.S. spot Bitcoin ETFs. For cross-asset traders, the gap between Bitcoin and gold shows how differently two hard assets respond when Federal Reserve rate expectations stay elevated.
Fiona Cincotta, StoneX Senior Market Analyst, has spent more than 15 years trading and analyzing U.K., European and U.S. markets, combining fundamental and technical analysis. Her coverage spans forex, equities, commodities and crypto assets, with a macroeconomic lens that follows how moves in one asset class ripple into the next.
Bitcoin is drawing a larger marginal move from the debasement trade than gold, even though investors reaching for hard assets are backing both with the same macro bet. The U.S. Treasury Department's buyback plans, stronger ETF inflows and renewed appetite for hard assets all coincided with an improvement in Bitcoin's momentum. According to Cincotta, "this isn't Bitcoin replacing gold. It just seems that the same macro trade is actually producing a larger marginal move in Bitcoin". That distinction matters for cross-asset traders, because Bitcoin is catching up from a much lower base and the move lines up with its position in the four-year cycle, rather than signaling a wholesale rotation out of gold.
"The higher for longer interest rate expectations and elevated Treasury yields increase the opportunity cost of holding non-yielding assets such as gold", Cincotta explains. Gold's upside remains capped despite exceptionally strong gold ETF demand, as renewed expectations that the Federal Reserve could stay hawkish for longer weigh on the precious metal. In contrast, Bitcoin is drawing on a different combination of forces, which helps explain why gold's 8% gain trails Bitcoin's advance by such a wide margin. For gold holders, continued demand is providing support, yet it is not translating into the kind of price momentum seen in Bitcoin.
--- Written by Frédéric Guétin, StoneX Media Producer
--- Expert: Fiona Cincotta, StoneX Senior Market Analyst
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Bitcoin, gold and stocks are all riding the same debasement trade, but their returns look very different. Bitcoin is pulling far ahead, while higher-for-longer Federal Reserve expectations keep a lid on gold despite strong ETF demand.
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Bitcoin's push to an eight-month high has less to do with crypto news than with the energy market. A roughly 10% drop in oil prices has cooled inflation worries, pulled Treasury yields lower and loosened conditions for risk assets across the board.
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