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Bitcoin falls as investors favor gold after cryptocurrency crash
Bitcoin (BTC-USD) is having a volatile start to October.
The world's largest cryptocurrency rose sharply at the beginning of the month as investors sought protection from the uncertainty surrounding a possible US government shutdown. However, on Friday, the price of bitcoin fell from $121,000 to $104,000 after President Trump threatened to impose 100% tariffs on Chinese goods.
Bitcoin's decline is particularly noticeable against the backdrop of rising gold (GC=F), which has reached new all-time highs above $4300,18 and is up 9% over the past month. For comparison, bitcoin has not yet recovered from Friday's losses and has lost more than {{3}}% of its value against the dollar over this period.
"Right now, capital is clearly favoring gold because of its positive momentum and lower volatility," Sean Farrell, head of digital asset strategy at Fundstrat, told Yahoo Finance. He added that central banks are acting as structural buyers of gold, which provides some support to this market.
Farrell also suggested that investors may eventually switch to bitcoin from gold, as the precious metal often outperforms cryptocurrencies.
On Friday morning, bitcoin was trading at around $105,000 per token. Veteran Wall Street strategist Ed Yardeni explained bitcoin's sharp drop last week in a note on Wednesday.
"The cryptocurrency derivatives ecosystem has been exacerbated by the recent drop in bitcoin," Yardeni wrote. "During the sharp decline, liquidity dried up, leading to the liquidation of more than $19 billion worth of crypto futures and leveraged positions."
According to him, during a rapid price drop, the platforms automatically closed risky trades to prevent greater losses.
Traders also spotted a "whale" who made $192 million by betting on bitcoin's decline before the sudden collapse, which could have exacerbated the selloff. The same wallet made another bearish bet on Sunday night.
Cryptocurrency bulls entered October with expectations of a strong month, as bitcoin has grown in 10 of the last 12 years, according to Compass Point Research.
Last week, cryptocurrencies hit all-time highs above $126,000 per token, along with precious metals, which also set records. Wall Street called it a "devaluation trade," a hedge against weakening fiat currencies.
Crypto analysts predict that bitcoin will end the year at a higher level: JPMorgan predicts a price of $165,000, while Citi foresees $133,000 by the end of the year and $181,000 by the end of 2026.
Author: Ines Ferre, Senior Business Reporter Yahoo Finance.
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