"Trump 2.0" triggers risk-averse demand Bitcoin underperforms gold

Wenxia ** Junxiong**

Bitcoin is now under pressure after a sharp outperform of most asset classes in 2024. With Donald Trump's return to the White House and geopolitical instability intensifying, the market has set off a wave of safe-haven investment.

Statistics show that Bitcoin’s growth rate so far this year is slightly more than 3%, far behind gold’s 9% increase in the same period.

Bitcoin’s current price is more than 10% lower than its peak hit last year. As the market expects Trump to introduce policies that are good for the cryptocurrency industry in his second term, Bitcoin hit a record high at the end of last year, and its price once approached $110,000 per coin.

Although Bitcoin is often described as a gold-like store of value due to its inherent scarcity (supply is limited to 21 million), the token has not fully fulfilled this feature at least yet. Bitcoin’s trend is often highly correlated with technology stocks.

While Bitcoin can be regarded as an asset hedging fiat currencies, its attractiveness has been suppressed in the current strong market environment of the US dollar, said Aoifinn Devitt, senior investment advisor at Moneta Group LLC.

“Bitcoin may gradually develop market-independent characteristics over time, but it currently performs more like the most risky asset,” Devitt said.

In contrast, as one of the most typical safe-haven assets, gold has benefited from a series of recent turbulent events, with Trump frequently placing tariff threats to countries and claiming that the United States may take over the Gaza Strip. Boosted by this, spot gold prices soared to $2,886.84 per ounce on Friday, setting a new record high.

Citigroup, ING and UBS are optimistic about gold rising to $3,000 per ounce. Both UBS and ING expect the Fed to still have room for interest rate cuts this year, and the rate cut may drive gold buying to increase. Gold does not generate interest, so it performs better in a low interest rate environment.

ING also pointed out that Trump's recent remarks about the Gaza Strip have exacerbated geopolitical uncertainty.

Meanwhile, central banks remain important buyers of gold and may continue to buy gold on a large scale this year to reduce their dependence on the US dollar.