[Asia Economy Reporter Yujin Cho] Bloomberg reported on the 24th (local time) that the price of the cryptocurrency Bitcoin has plummeted significantly, causing gold prices to soar to their highest level in four months since the beginning of the year.
As of 8:15 a.m. that day, gold traded on the Singapore Exchange was priced at $1,883.89 per ounce. Gold prices reached their highest level in four months, hitting $1,890.13 last week.
Riding the upward trend, gold prices have risen double digits compared to the March low of $1,680, now approaching $1,900 per ounce.
Bloomberg analyzed that this is due to gold emerging as a hedge against inflation pressures that have increased with the economic reopening following COVID-19.
As cryptocurrency prices plunged, risk asset preference shifted toward safe assets, restoring demand for inflation hedges that had moved into Bitcoin.
According to cryptocurrency information site Coindesk, as of 10:30 a.m. the previous day, Bitcoin’s price was $32,677.44, down 14% from 24 hours earlier.
Compared to mid-last month when it neared $64,000 per coin, the price has halved. Consequently, the market capitalization, which once exceeded $1 trillion, shrank to $611.59 billion.
The second largest cryptocurrency, Ethereum, also traded at $1,914.81, down 16.80% from 24 hours earlier. Its market cap decreased to $221.67 billion.
If the outflow of funds from the rapidly growing cryptocurrency market accelerates, it is expected to have a considerable impact on the global asset market.
Opinions on the gold price outlook are divided. Former U.S. Treasury Secretary Larry Summers said that even if the economic status of cryptocurrencies is limited, they could become an alternative asset to gold.
In an interview with Bloomberg, former Secretary Summers said cryptocurrencies offer an alternative to gold for those seeking assets separated from routine government operations, maintaining characteristics similar to "digital gold."
He stated, "Cryptocurrencies could become a 'consensus form' for people seeking safety to hold assets," adding, "I speculate that cryptocurrencies will probably be maintained as a kind of digital gold."
Meanwhile, there are also forecasts that prices may rise temporarily due to inflation concerns but further increases will be limited.
This is because the U.S. Federal Reserve (Fed) is expected to signal tapering asset purchases sooner than anticipated. If market interest rates such as Treasury yields rise further, gold, which does not bear interest, could face downward pressure.
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