Bitcoin [BTC] and gold are witnessing massive drops as Russia announces world’s first COVID-19 vaccine and president Donald trump is considering a tax cut on capital gains. Reportedly, President Putin’s daughter receives the first dose of Sputnik V.
Price Analysis Gold And Bitcoin
- GOLD
The gold chart is currently etching one of the worst percentage drops in 2020; down nearly 4% from today’s opening at $2027 per/ounce. While a lot of trading is left to occur today, currently the drop is surpassing the closing levels on the worst day of COVID-19 crash. On 12th and 13th March, the drop-in Gold was 3.52% and 3.03%, respectively.
- BITCOIN
Bitcoin [BTC] seems to be following the drop as it plummets 2.4% on a daily scale as well. The decoupling of Bitcoin [BTC] with the stock market was confirmed last week as the 90-day correlation index fell below 0.2 from highs around 0.6. On the other hand, the 90-day correlation with gold rose to 0.15. The reaction to the vaccine news seems to be confirming it’s coupling with gold. This, however, is indicating a negative signal, at the moment.
Is the Fear of Economic Downfall Over?
Throughout history, gold has acted as an inflation hedge, rising along with inflation in the economy. However, since the COVID-19 crash, it is following an inverse relationship with inflation. Due to the lockdowns and high unemployment, the economy, in reality, is showing signs of deflation.
Gold is primarily rising due to the devaluation of the dollar, which is a response to the massive quantitative easing stimulus by the governments. In the chart below, the vertical line on 12 March represents the beginning of the COVID-19 crash. Gold’s
The enormous supply of FIAT along with the disconnect from previous trends in the asset prices is the major reason for the distrust in the economy. It is also a positive stimulus for gold and Bitcoin investment.
While the vaccine is a potent short-term catalyst for the drop, it is unlikely to have a major effect in the long run. As mentioned earlier on CoinGape, the market was already pricing the developments around the vaccine. Profit-booking in gold is also a strong reason for the drop; levels above $2050 per/ounce is of psychological importance as well.
How do you think the development will affect the global economic outlook? Please share your views with us.
