Bitcoin's Decline Sparks Favour for Gold Amid US Government Shutdown Uncertainty

Bitcoin (BTC-USD) has declined to $108,000, down 8% in the past month, while gold (GC=F) has climbed to new all-time highs above $4,200 and risen 16% in the same period. The cryptocurrency's descent is attributed to reduced volatility and structural buyers in central banks. Investors are expected to eventually rotate into bitcoin from gold, with analysts predicting a year-end price target of $165,000 for BTC-USD.

Bitcoin (BTC-USD) has seen a notable decline, falling to $108,000 from its recent highs, marking an 8% drop in the past month. Concurrently, gold (GC=F) has reached new all-time highs, surging above $4,200 and increasing by 16% in the same period. These contrasting performances have sparked interest in the comparative value and utility of these two assets.

The recent decline in Bitcoin's price can be attributed to reduced volatility and structural buyers in central banks. As Bitcoin's volatility has decreased, it has become less attractive to risk-averse investors who prefer the stability of gold. Meanwhile, gold's price has been bolstered by geopolitical uncertainties and the potential for inflation, making it an appealing safe-haven asset.

Analysts predict that Bitcoin's price may eventually rotate back into favor, with year-end price targets set at $165,000 for BTC-USD. This prediction is based on several factors, including Bitcoin's increasing adoption as a store of value and its utility as a medium of exchange. Additionally, Bitcoin's limited supply and decreasing volatility make it a more attractive option for long-term investors.

To better understand the dynamics between Bitcoin and gold, it is useful to consider JPMorgan's "fair value" model. This model equates Bitcoin's total market value with the total value of gold held privately for investment purposes. According to the World Gold Council, there are 48,634 tons of gold held privately for investment purposes, valued at approximately $6.3 trillion. Dividing this figure by the total number of bitcoins in circulation (19,931,743) yields a theoretical price target of around $313,800 per coin, according to a Finimize analysis.

However, this model underestimates Bitcoin's true value by ignoring its additional utility and the fact that its supply is more limited than gold's. Bitcoin can be used as a form of payment, a method of money transfer, and as collateral for loans, making it more versatile than gold. Furthermore, Bitcoin's supply is capped at 21 million, while gold's supply is projected to increase by 25% or more. This makes Bitcoin a rarer asset and potentially more valuable over the long term.

The recent acquisition of 220 BTC by Strategy Inc. for $27.2 million also highlights the increasing institutional interest in Bitcoin. This acquisition follows a routine pause in buying and aligns with the company's quarter-end financial reporting cycle. Strategy Inc.'s total holdings now represent over 3% of Bitcoin's total supply, further solidifying its position as the largest corporate holder globally, according to a Coinlaw report.

In conclusion, while Bitcoin and gold both serve as store-of-value assets, Bitcoin's additional utility and limited supply give it an edge over gold. The recent decline in Bitcoin's price may be an opportunity for investors to consider its long-term potential. As volatility decreases and institutional interest grows, Bitcoin's price may continue to appreciate, potentially reaching the year-end target of $165,000.