Bitcoin and Gold’s ongoing correlation reflects the investment preferences of the younger versus the older generation during the coronavirus-induced global financial crisis.
According to a report by multinational investment firm JP Morgan, interest in alternative assets has risen significantly with Millennials choosing Bitcoin and other digital assets, and Boomers going for gold.
Investment flows analysis shows that investors from the older demographic are deploying their excess liquidity into bond funds which have risen significantly over the past two months.
Since March lows, investor demand for stocks has risen 46% globally with notable rallies in both gold-backed exchange-traded funds and cryptocurrency markets.
The analysis also noted increased amateur trading activity in the market with surprisingly a better outcome from their stock picks and market timing than most seasoned institutional investors.
For the last five months, there have been strong inflows in both gold and bitcoin Exchange Traded Funds (ETFs) as old and young people move from the dollar to other stores of value.
Gold and Bitcoin as More Solid Alternative Currencies
Bitcoin’s three-year-long bear market started to break post-halving, while the average gold prices in the last three years have been between $1.3k-$1.5k, with the highest price recorded at $1,542 in 2019.
On July 28, Goldman Sachs raised its 12-month forecast for gold by 15% as growing demand is expected to drive its price to $2,300 per ounce in one year. Gold rose to an all-time high of $2,000 an ounce on August 4, two days after Bitcoin reached its 2020 all-time high of 12K. In 2020 alone gold has risen by more than 30%.
Many analysts have said that both rallies are affected by investor choices, as everyone rushes to get out of fiat money, amidst fear of its imminent collapse due to massive debasing of national currencies.
According to Bloomberg, its Spot Dollar Index has fallen by 1.7% during the rally period of both assets and creating more speculation that the dollar’s weakness is accelerating fast.
In the US, analysts have warned that the dollar is on the verge of losing its status as the world’s reserve currency. Institutions and people are now moving cash into alternative assets, as the Federal Reserve and other Central Banks continue to pump more money into the global economy.
Young people’s attraction to digital assets like Bitcoin is its affordability, ease of access, and more interestingly, its volatility. They see bitcoin not only as a safe haven but also a solid opportunity for them to accumulate wealth by buying low and selling high.
Part of the rationalization as to why volatility is acceptable is that the Bitcoin and crypto market is still young and stability will come with more adoption and a higher market cap.
The older generation, the boomers, are also anxious of the ongoing money printing and are looking to preserve their massive wealth in gold, which to them is a more familiar and reliable store of value than digital assets.