Bitcoin Nears $90,000: Can It Keep Outshining Gold?

Following the recent US presidential election results, the financial markets have experienced significant shifts. While certain assets, such as US indices, Tesla (TSLA), and Bitcoin (BTCUSD), have surged, others, like gold (XAU) and silver (XAG), have underperformed. 

Bitcoin, in particular, has captured traders’ attention. On Monday, 11 November, it neared a new all-time high of $90,000 and surpassed silver as one of the largest financial instruments in the world. 

As of Tuesday, 12 November, Bitcoin’s market cap (approximately $1.75 trillion, as of the time of the writing) also exceeded the market values of several prominent US and international companies, such as Meta Platforms (META) ($1.472 trillion), Tesla ($1.123 trillion), Warren Buffett’s Berkshire Hathaway (BRK.B) ($1.007 trillion), and TSMC (TSM) ($1.007 trillion), among others.

This increased interest in Bitcoin may be evident in the performance of the iShares Bitcoin Trust (IBIT), which has recently surpassed the iShares Gold Trust (IAU) in terms of assets under management (AUM). The IBIT Exchange-Traded Fund (ETF) has attracted significant inflows since Donald Trump’s win, totaling approximately $1 billion over the past week and $27 billion since its launch in January 2024. On Friday, 8 November, the Bitcoin ETF managed around $34.3 billion in AUM, higher than the roughly $33 billion gold ETF (and this was before Bitcoin broke a new crypto milestone). (Source: CNCB)

As Bitcoin continues to gain momentum, some traders might wonder about its long-term trajectory and the potential for the cryptocurrency to outshine traditional commodities and safe-haven assets like gold. In this analysis, we will delve into the factors driving these market dynamics and explore what traders might expect from both assets.

Bitcoin’s Post-Trump Win Rally: What Could Be Driving the Surge?

The recent surge in Bitcoin’s value could be influenced by the upcoming shift in political leadership in the US. Many traders anticipate a more favourable regulatory environment under a Donald Trump administration and a Republican-controlled Congress. Some market participants seem to see the potential for regulatory changes that may open doors for greater interest in digital assets.

In recent years, the crypto industry has faced significant challenges under a regulatory landscape shaped by the Democratic Biden administration. Since 2021, Securities and Exchange Commission (SEC) Chair Gary Gensler has implemented strict oversight. Gensler’s policies, viewed by some as restrictive, have created a cautious atmosphere among traditional traders, potentially contributing to a slower pace of adoption for digital assets. (Source: Binance)

Trump’s potential appointment of a new SEC chairperson with a more crypto-friendly stance could spark greater optimism within the industry. A more lenient regulatory approach could reduce entry barriers, potentially allowing more US institutions to participate in the crypto market, possibly driving both price momentum and market stability.

Furthermore, Trump’s recent involvement in the crypto space through his investment in World Liberty Financial, a decentralised finance (DeFi) protocol, has signalled a potential shift in his view of digital assets. Some traders see his apparent openness to crypto as another positive indicator, suggesting that his administration might take a supportive stance on industry growth.

Why Did Gold Take a Hit After the US Election?

Unlike Bitcoin, gold prices have been under pressure since the election, experiencing a decline of roughly 5%. After reaching a record high of around $2,800 on Wednesday, 30 October, gold has retreated, trading near a month-long low of $2,600 as of Tuesday, 12 November.

As of November 2024, goldhas been up more than may have been  33% due to increasing central bank gold purchases, geopolitical uncertainty, and falling interest rates. However, recent developments in the US seemed to have contributed to gold’s decline.

One primary factor in gold’s recent price drop could be attributed to the strength of the US dollar, which has surged to a four-month high on expectations that the Trump administration’s policies will be expansionary. The inverse relationship between the dollar and gold often means that a stronger dollar leads to lower gold prices, as gold becomes more expensive for buyers using other currencies. If the dollar continues to rise, this trend could exert additional downward pressure on gold in the short term.

Another factor behind the recent Gold price movement could be the increase in bond yields, driven by concerns that Trump’s policies might spur inflation. Higher bond yields reduce the appeal of gold, which does not generate any yield, making it less attractive to traders seeking returns.

Conclusion

Bitcoin’s surge to almost $90,000 marks a milestone driven by optimism around potential regulatory shifts, increasing institutional interest, and a more favourable political climate that many see as conducive to the growth of digital assets. 

Gold, by contrast, has recently faced headwinds potentially from a strong US dollar and rising bond yields, which have dampened its allure for some traders. Yet, Gold’s historical role as a safe-haven asset could still offer stability, especially as uncertainties around potential protectionist trade policies from Trump create concerns about global economic stability. 

Whether Bitcoin will ultimately surpass gold over the long term remains uncertain. Still, for now, each asset’s unique characteristics equip it to respond differently to the evolving economic and geopolitical landscape.