Bitcoin is beginning to erode the global value supply of gold, and even the US dollar.
According to one analyst, the US government will “regulate bitcoin as hell” if it sees bitcoin as a threat to the US dollar.
However, the sooner companies and asset managers make a decision, the more difficult it will be for the state to intervene.
Bitcoin eats up market share of gold ETFs
Looking back, we can say that Elon Musk’s constant tweets about Dogecoin could be a hint of buying Tesla BTC. Now that bitcoin enthusiasts are looking forward to the next significant corporate investment, converting cash balances into bitcoin could have more serious implications than offering it as inflation hedge.
Bitcoin and gold were negatively correlated with the dollar index during the COVID-19 market crash.
Spearman’s 90-day correlation for BTC with the dollar fell to minus 0.36 along with gold. The other side of the dollar, though, contributed more to Bitcoin’s rise than gold.
Gold peaked at $ 2,075 an ounce on August 7 last year. Since then, BTC has surged 320% to a peak of $ 48,200 reached yesterday, while gold is in a downtrend.
Last October, a JP Morgan analyst found that investments in Grayscale GBTC have outperformed the gold ETF allocation since 2019. They also predicted that Bitcoin’s value could rise tenfold compared to gold.
The distribution of BTC cash reserves, as exemplified by Tesla and MicroStrategy, acts as insurance for these companies.
However, this trend is starting to negatively affect the value of the dollar. While Bitcoin is heading towards $ 50,000, the Dollar Index (DXY) is leaning towards a negative breakout below $ 90.5. The currency index found support against competing reserve currencies at $ 89.2.
If companies begin to reallocate their portfolios towards BTC, the decline in popularity could hurt the value of the dollar more than inflation.