Bitcoin renews three-month high, gold continues rally (Updated)
Bitcoin continued its rapid recovery and on August 25 rose above $80k for the first time since mid-May. At the same time, gold continues its rally amid a weak dollar and investor concerns about U.S. public finances.
During Asian trading, the largest cryptocurrency rose to approximately $81.2k, hitting a high not seen in more than three months. Later Bitcoin pulled back slightly and traded near $80.3k. Over the past week, its price has gained about 25%. :contentReference[oaicite:0]{index=0}
As recently as August 20, Bitcoin had just crossed the $72k mark, so in less than a week the cryptocurrency added more than $8k. Overall, since the beginning of August, its growth is approaching 30%.
Bitcoin and gold supported by the same trend
One of the key factors behind the new rally is the situation in the U.S. bond market. The U.S. Treasury last week announced an increase in buybacks of long-term government bonds. Investors perceived this move as an attempt to curb the rise in long-term rates amid large budget deficits and U.S. government debt that has exceeded $40 trillion.
This brought back the so-called debasement trade – a play on fiat currency depreciation. Under this strategy, investors reduce some positions in dollar assets in favor of instruments with limited supply or traditional stores of value – primarily gold and Bitcoin.
An additional argument for this strategy was the weakening dollar. After the announcement of expanded bond buybacks, the U.S. currency came under pressure, and demand for alternative assets increased.
Gold approaches three-month high
A similar trend is observed in the precious metals market. At the close of August 24, Comex gold futures rose for the fourth consecutive trading session to $4,640.8 per troy ounce. Over four sessions, the metal gained more than 6%.
On August 25, gold rose even higher: spot prices approached $4,700 per ounce, the highest level in about three months. In August, the precious metal has added about 13-15%.
Thus, Bitcoin and gold are currently receiving support from a similar set of factors – a weaker dollar, concerns about the U.S. budget deficit and debt, as well as uncertainty about the Federal Reserve's future interest rate policy.
Large investors return to Bitcoin
The crypto rally also has its own drivers. After several months of weak activity, inflows into U.S. spot Bitcoin ETFs resumed. Just on August 21, such products received over $500 million, signaling a return of institutional demand.
The surge was also amplified by the liquidation of bets against the cryptocurrency. According to Bitfinex analysts, over two days traders were forced to close about $3 billion in short positions. Closing them required buying Bitcoin, which further accelerated the price movement.
Another positive factor remains expectations regarding crypto market regulation in the U.S. President Donald Trump last week met with crypto industry representatives and urged Congress to speed up passage of the Clarity Act, which is meant to establish clearer federal rules for digital assets.
However, analysts caution that volatility may remain high after such a rapid jump. Further Bitcoin dynamics will largely depend on the dollar's movement and U.S. bond yields, real progress in crypto regulation, and Federal Reserve signals on rates.
The next important guidepost for both markets will be Fed Chair Kevin Warsh's speech at the Jackson Hole symposium. Investors will look for signals in his words about the future trajectory of U.S. interest rates.
Sources: The Wall Street Journal, MarketWatch, The Wall Street Journal
