“Trump 2.0” triggers safe-haven demand, Bitcoin underperforms gold

Text  Xia Junxiong

After outperforming most asset classes by a wide margin in 2024, Bitcoin is now under pressure. With Donald Trump's return to the White House and geopolitical instability increasing, the market has set off a wave of safe-haven investments.

Statistics show that Bitcoin has risen by just over 3% so far this year, far behind the 9% increase in gold over the same period.

The current price of Bitcoin is more than 10% lower than its peak last year. As the market expected Trump's second term to introduce policies that are favorable to the cryptocurrency industry, Bitcoin hit a record high at the end of last year, with the price approaching $110,000 per coin.

Although Bitcoin is often described as a store of value similar to gold due to its inherent scarcity (the supply is limited to 21 million coins), the token has not fully realized this feature, at least for now. Bitcoin's performance is often highly correlated with technology stocks.

Aoifinn Devitt, senior investment advisor at Moneta Group LLC, said that while Bitcoin can be seen as an asset to hedge against fiat currencies, its appeal is suppressed in the current market environment of a strong dollar.

"Over time, Bitcoin may gradually develop market-independent characteristics, but currently it behaves more like the riskiest asset," Devitt said.

In contrast, as one of the most typical safe-haven assets, gold has benefited from a series of turbulent events in recent times, with Trump frequently threatening tariffs on various countries and claiming that the United States may take over the Gaza Strip. Boosted by this, spot gold prices soared to $2,886.84 per ounce on Friday, setting a new record high.

Institutions such as Citigroup, ING and UBS are optimistic that gold will rise to $3,000 per ounce. Both UBS and ING expect that the Federal Reserve still has room to cut interest rates this year, and rate cuts may drive more gold buying. Gold does not generate interest, so it performs better in a low-interest rate environment. ING also pointed out that Trump's recent remarks on the Gaza Strip have increased geopolitical uncertainty. At the same time, central banks remain important buyers of gold and may continue to buy gold on a large scale this year to reduce their dependence on the US dollar.