The bitcoin rally was catalyzed by microeconomic factors at the end of 2023, but may have recently fused into the more macroeconomic-fueled gold rally, according to Wolfe Research. The yellow metal is up 5.7% in March, which accounts for most of its 6% gain over the past month. On Friday, it hit record highs for a fourth consecutive session. Bitcoin has also been trading at record highs this week, after hitting new all-time highs on both Tuesday and Friday. It’s up 8% in March. Bitcoin’s positive price performance initially was based on added demand expected from the approval of spot bitcoin exchange-traded funds in the U.S., plus the price shock the cryptocurrency would experience soon after the late-April bitcoin halving . Additionally, however, “positive factors for bitcoin have lined up over the past year,” Stephanie Roth, Wolfe’s chief economist, said in a note Thursday. “Growth equities have done well (which bitcoin has been correlated with) [and] the market has begun pricing in an easier Fed.” “While we believe the recent catalyst for the bitcoin rally was the launch of the spot ETFs and upcoming halving cycle … it now appears to be fueled by positive risk sentiment and easing liquidity,” she added. Those factors are likely adding to the recent strength in gold too, she said. Gold is widely seen as a safe haven asset and inflation hedge, a narrative many also ascribe to bitcoin, sometimes known as “digital gold.” However, also like bitcoin, it doesn’t always behave that way, said Marion Laboure, macro strategist at Deutsche Bank. “Gold fell 21% from March to November 2022, while core CPI averaged 6.2% and the S & P 500 fell 11%,” she said. “We view gold as an asset that trades well on an easier Fed, driven primarily by the dollar [and] real interest rates.” Both worked against gold that year, she noted, helping to explain its poor performance despite strong inflation. The same was true for bitcoin. Deutsche Bank also cited increasing liquidity as one reason bitcoin pushed to new highs this week and will continue to do so, along with the introduction of U.S. spot bitcoin ETFs, their record inflows and the April halving. “More investors will likely seek out higher-yielding alternative assets as treasury returns decline,” said Laboure. “This flow of capital into non-traditional investment classes like cryptocurrencies could further support an ongoing rally in digital currency prices.” — CNBC’s Michael Bloom contributed reporting.
Why the recent rallies in bitcoin and gold may be related, according to Wolfe Research
