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Bitcoin rides wave with gold as Covid-19 relief cash unleashed by central banks sparks search for speculative and safe haven assets

  • Bitcoin has more than doubled since the March sell-off triggered by the coronavirus pandemic, as gold reaches its all-time high at US$1,939
  • The US dollar weakness, and US China tension in recent weeks and inflation fears have raised expectation that bitcoin will track gold’s rise

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Bitcoin has more than doubled in price since the March sell-off triggered by the coronavirus pandemic. Photo: Reuters
Georgina Lee

Bitcoin’s price has soared since the March rout in global capital markets, outpacing gains in equities and precious metals amid a flood of liquidity unleashed by central banks to combat the coronavirus pandemic, as enthusiasts test the cryptocurrency’s claim to be a safe haven asset.

Over the weekend, the oldest of the cryptocurrencies broke through US$10,000, a level that had eluded it for much of the past two months.

Since the worst of the market sell-off triggered by the coronavirus in March, bitcoin has more than doubled, reaching US$10,988 on Tuesday. That compared with a 44.8 per cent gain in the S&P 500, and 32 per cent in spot gold..

Its resurgence has come alongside that of spot gold, which reached an all-time high of US$1,939.49 per troy ounce on Tuesday, as investors sought out safe haven assets. Deteriorating relations between the US and China have clouded the economic outlook further as the world grapples to get Covid-19 under control.
“If gold surges beyond US$1,900 on the basis of dollar weakness, bitcoin could tag along. This will be driven by investors who see the US dollar depreciating further, potentially eroding its role as the world’s reserve currency,” said Stephen Innes, Asia-Pacific market strategist for foreign exchange trading platform AXI Trader based in Bangkok.

The dollar index, which measures the currency against a basket of trading peers, fell as much as 0.5 per cent on Monday to its lowest level since July 2018.

The dollar weakness has come amid renewed tension between the US and China, after Beijing on Monday took over the US consulate in Chengdu after ordering the facility to close in a tit-for-tat battle following last week’s forced closure of the Chinese consulate in Houston. That has compounded investors’ concerns about the outlook for the global economy, which is forecast by the International Monetary Fund to contract by 4.9 per cent this year.

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