Bitcoin has dropped 4% over the past seven days. Coincidentally, gold also experienced a decline. Gold suffered its worst week since the March crash, with stocks, Bitcoin, and all the risky assets dropping in a row. Coincidentally, the price of BTC also dropped, strengthening the argument that BTC is perceived as a store of value.
In the past seven days, as the US dollar rose and gold struggled with it, Bitcoin lost 4%. The high correlation between BTC and gold may indicate that investors are valuing both assets within the same safe haven assets.
Bitcoin Shows Resilience
Since September 2, the S&P 500 index has dropped 7.89% due to the incentive deadlock. The resurgence of the epidemic has increased the selling pressure on stocks, affecting the risks on other assets. When the US stock market faces a technical and fundamental weakness, assets such as Bitcoin and gold remain vulnerable to pullbacks. For example, in March, Bitcoin dropped to $ 3,596. In the same period, the US stock market fell about 9% in a single day. Despite the poor performance of US stocks, Bitcoin remained above $ 10k. The top cryptocurrency has shown resistance in recent weeks amid weakening stocks and gold momentum.
Holger Zschaepitz, a market strategist at Welt, used the following statements:
“To put things in perspective: Gold has left behind the worst week since the market panic in March.”
Gold dropped a little over the past week due to its past performances, performing relatively well given the stock market decline. Since the August peak, the spot gold price has also dropped more than 10%. For an asset like gold, a price movement of 10% over a two-month period is considered extreme volatility.
Can Bitcoin Compete Against Gold?
If we put aside the optimism around Bitcoin, we can see that the foundations of the blockchain network are getting stronger. As we previously reported, Bitcoin hashrate has consistently reached new heights after the block reward halving. A block reward halving typically causes the hashrate to drop sharply because it cuts miner income in half.
Cameron Winklevoss, the billionaire Bitcoin investor and co-founder of Gemini, said the fixed supply of BTC strengthened his long-term prospect. Winlevoss used the following statements:
“Bitcoin is the first commodity in the universe where supply does not follow demand. Bitcoin demand does not and cannot expand its supply. Compare this to gold. Aboveground gold supply is expanding with demand. Its supply is flexible and there is no end in sight. ”
This situation makes many investors think that Bitcoin will gain more value over time. The combination of Bitcoin’s growing perception as a store of value and its rising supply illuminates BTC’s long-term outlook.