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

After outperforming most asset classes by a wide margin in 2024, Bitcoin is now under pressure as markets seek to avoid risks amid the return of Donald Trump to the White House and rising geopolitical instability.

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

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

While bitcoin is often described as a store of value similar to gold due to its inherent scarcity (supply is capped at 21 million), the coin has yet to fully live up to that attribute, at least for now. Bitcoin’s performance tends to be 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.

“Bitcoin may develop market-independent properties over time, but right now it’s behaving 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 recent turbulent events. Trump has frequently threatened tariffs on various countries and claimed that the United States may take over the Gaza Strip. Boosted by this, the spot gold price soared to $2,886.84 per ounce on Friday, setting a new record high.

Citigroup, ING and UBS are all bullish on gold rising to $3,000 an ounce. Both UBS and ING expect the Fed to have room to cut interest rates this year, which could boost gold buying. Gold does not generate interest, so it performs better in a low-interest 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 significant buyers of gold and are likely to continue buying large amounts of the metal this year to reduce their reliance on the U.S. dollar.