The gold and bitcoin bulls are back

Bitcoin punched above $30 000 in the last few days, ending Monday above $31 000, propelled partly by some encouraging support for cryptos from Larry Fink, CEO of Blackrock, the world’s largest investment house.

The world’s largest crypto traded at $34 394 around midday on Tuesday.

Despite its volatility, bitcoin (BTC) is revered by many as a store of value in uncertain times because of its limited supply – more than 19 million have been “mined”, and there will never be more than 21 million.

The endorsement by Fink appears to have caught traders’ attention, pushing the price from $27 000 to $34 000 over the last week. On South African crypto exchanges, BTC traded above R600 000 on Monday for the first time in several months.

In a sign of the institutional warming to an asset class previously dismissed by the big investment houses, Fink told Fox Business that BTC’s rally was driven by a flight to quality in times of crisis.

“I think some of this rally is way beyond the rumour. I think the rally [last week] is about a flight to quality with all the issues around the Israeli war now, global terrorism, and I think there are more people running into a flight to quality, whether that is in treasuries, gold or crypto – depending on how you think about it,” said Fink.

“And I believe crypto will play that type of role as a flight to quality.”

The rally Fink was referring to was based on an incorrect crypto news outlet Cointelegraph report that the US Securities Exchange Commission (SEC) had approved a spot exchange-traded fund (ETF) for bitcoin.

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Blackrock is among several large investment houses applying to register spot ETFs on bitcoin instead of the derivative versions which already exist. Others awaiting approval for spot BTC ETFs include Fidelity, Invesco, Franklin Templeton, WisdomTree and Ark Invest.

Not surprisingly, South African crypto exchanges report increased trading volumes over the last week.

Says Farzam Ehsani, CEO of VALR: “Bitcoin has gained 15% over the last month. This comes from global geopolitical tensions and some of the largest voices in traditional finance, such as Larry Fink, BlackRock CEO, referring to this asset class as a ‘flight to safety’. Bitcoin’s rise is juxtaposed against equity markets falling over the last month. At VALR.com, we’ve seen increased trading volumes given this price action.”

BTC price volatility contributed to an 80% rise in weekly volumes in South Africa, says Luno general manager for Africa, Marius Reitz. “The growing expectation that the bitcoin spot exchange-traded fund (ETF) could finally be approved by US regulators seems to be a factor in this boost, as does the upcoming bitcoin halving in April 2024. These conditions have gone towards Bitcoin’s market dominance rising to almost 50% over the weekend – the highest it has been for over two years.”

The rate of bitcoin issuance is halved every four years. Currently, bitcoin miners compete for 6.25 BTC roughly every 10 minutes, though this will drop to half that in about April 2024.

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Another exchange reporting increased volumes on the back of the recent rally is FiveWest. “BTC and other cryptos showed positive gains over the weekend, driven by the news that the SEC won’t appeal the court decision regarding Grayscale’s spot bitcoin ETF application. This news has sparked the interest of investors, as it raises the likelihood of a BTC spot ETF approval by the end of the first quarter of 2024, just before the bitcoin halving,” says Omer Iqbal, FiveWest CEO.

“Investor sentiment has also been rattled by the war in the Middle East, people are looking for safe haven investments like gold and bitcoin, driving trade volumes higher and causing the price to rise.”

Altcoins – meaning all other cryptocurrencies other than BTC – have yet to respond with the same zest but typically tend to follow BTC’s lead.

Gold

Gold has formed a triple top at $2 000/oz, regarded by technical traders as a strong bullish indicator. Bulls expect a break above this level to ignite furious buying, particularly if war in the Middle East escalates. The S&P 500 index has been struggling to make headway since July and has retreated to levels last seen in May, accounting for some of the flight to gold.

Triple top formation in gold

Blackrock says the S&P 500 index typically performs well in the last quarter of the year. Though “much of the market’s return this year has been driven by a handful of mega-cap stocks in the ‘tech-plus’ sectors, we believe there is an opportunity to uncover those next-level stocks that have yet to be fully rewarded for their fundamentals.”

Rich Dad Poor Dad author Robert Kiyosaki was enthusiastic about the omens for gold and BTC, tweeting:

Gold will soon break through $2,100 and then take off. You will wish you had bought gold below $2,000. Next stop gold $3,700. Bitcoin testing $30,000. Next stop Bitcoin $135,000. Silver from $23 to $68 an ounce. Savers of fake dollars F’d. Please tell your friends to “Wake up.”…

— Robert Kiyosaki (@theRealKiyosaki) October 20, 2023