Bitcoin and gold poised to benefit as dollar weakens and central banks reduce US treasury holdings: analyst

Bitcoin and gold are experiencing renewed interest as macroeconomic conditions signal a potential shift away from the dominance of the U.S. dollar, according to an analyst.Over the past month, the U.S. dollar index has declined by 2.13%, while gold has surged 7.29% during the same period, reaching a record high of over $2,920 per ounce on Friday. Bitcoin followed a more volatile path over the past 30 days, rising to $108,000 on January 20 before retreating to its current level of approximately $97,200."Investors are gradually shifting away from U.S. Treasuries into alternative stores of value such as gold and bitcoin," Bitwise European Head of Research Europe André Dragosch told The Block. "Central bank net purchases of gold in Q4 2024 have already reached the highest level since at least 10 years and the recent spike in COMEX gold inventories implies a significant demand for gold by US investors as well," he added.Dragosch added that this trend has accelerated since the military conflict in Ukraine in 2022 and the associated freezing of Russian foreign assets that marked a key moment in the de-dollarization. "In this context, it should be noted that the usage of the U.S. dollar in SWIFT transactions has increased but the U.S. dollar as percentage of international reserves has declined implying that the dollar is less regarded as a safe store of value," he added,The US dollar’s decline and shifting investor sentimentDragosch said that, additionally, the yield on the 10-year U.S. Treasury note, which had recently peaked at 4.79%, has now eased to 4.5%. This comes as China and Japan — the largest foreign holders of U.S. debt — reduce their exposure to Treasuries, raising concerns about long-term demand for U.S. government bonds. "The big picture is that U.S. Treasuries are not considered the safest asset anymore which is also evident in the severe decline in long-term U.S. Treasuries and the breakdown of established correlations such as gold and U.S. real yields since 2022," the Bitwise analyst said.Dragosch added that there is also increasing evidence that central banks are looking into bitcoin as an alternative store of value. "We had an internal enquiry at Bitwise U.S. by a foreign central bank that literally wanted to invest parts of their U.S. Treasuries into spot bitcoin ETFs, and the Czech National Bank is also looking into this as we know," he said.Meanwhile, Standard Chartered global head of digital assets research Geoff Kendrick pointed out that concerns over potential trade tariffs under former President Donald Trump may be easing. "If oil trends lower on the prospect of a Russia-Ukraine peace deal and tariff risks recede, we could see risk assets, including bitcoin, move higher," Kendrick said in a note on Thursday. he Standard Chartered head of digital assets research added that if bitcoin starts to head higher, "look for a move to $102,520 soon."Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.© 2024 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.