After the chase for high return and going through constant turbulence over the last couple of months, it seems that funds are slowly shifting from the crypto craze to good ol’ gold. It’s no joke! Investors seem to be brushing up on this precious metal’s reliable and stable nature as Bitcoin and other cryptocurrencies experience instability. 

What Happened to Bitcoin?

With a fall of 36 percent, Bitcoin reported the worst monthly fallout ever since November 2018. The drop was highly influenced by rising environmental concerns and the impact of mining, along with a regulatory crackdown taking place in China. A combination of the two took a toll on this precious coin, ironically dubbed “digital gold,” and BTC pulled other cryptos along with it. 

Many things contribute to the rising popularity of cryptocurrencies, especially in the last year. A combination of the sheer price performance and the classic psychological effect called “the fear of missing out” or FOMO made Bitcoin reach its record high of near $65,000. Nonetheless, the journey of BTC is rough, with extreme volatility. It represents an entirely new asset class, with debatable intrinsic value and with fewer people participating in the market.

What’s Up with Gold?

As per gold, it rose above the critical psychological level, which is $1,900 per ounce, wrapping up the month with an 8 percent higher figure, turning positive. Much of this activity related to gold is directly influenced by the weakening of the 10-year Treasury yield, Bitcoin, and the dollar index, experts believe. 

Many things influence higher inflation in 2021, which seems to be an ongoing theme of the year, with trillions of stimulus dollars infused into the real economy, unfixed supply chains, and quickened vaccination rollouts. An environment with higher inflation seems suitable for precious metals such as gold, which is perceived as a very secure wealth store. 

Is the Economy Recovering?

After the effects of the pandemic taking large tolls on the economy, coordination of major central banks contributed to the efforts to stabilize the financial markets. Trillions of “first-aid” dollars are pumped ever since last year, and central banks are also committing to longer-period lower interest rates. The negative correlation between gold and equities is most definitely increasing its attractiveness and the appeal for investors worldwide. 

The jittery equity market implies that gold is in the prime position for investors to pour their money into this precious metal. Gold will most likely continue to strengthen, thanks to investors’ concern over record deficit levels and debt, unstable financial markets, and emerging inflation. 

Conclusion

Many were lured into the crypto trend recently. Still, the ongoing market instability drives the investors away from digital coins when deciding to put in their hard-earned money in an asset. As a well-marketed promise of alternative investment, Bitcoin has exceptional advantages; the first is that it is decentralized, among other things. But Bitcoin and the crypto markets will most likely recover, and it is ultimately up to investors to decide which one will they choose – the gold fever or the crypto craze?