Preface

Recently, the financial markets witnessed a significant shift as gold's impressive eight-week winning streak came to an end, while Bitcoin emerged with notable gains. Investors' decisions to take profits on gold before the Federal Reserve's upcoming policy decision highlights a growing interest in riskier assets such as Bitcoin. This article delves into these recent developments, exploring the causes and implications for both markets.

Lazy bag

Gold's price dropped over 6% as profit-taking occurred, leading to heightened focus on Bitcoin, which gained over 5%. This shift emphasizes changing risk appetites.

Main Body

Gold's recent pause in its rally coincided with a critical moment as traders opted to capitalize on its surge by liquidating some positions. This occurred just before the Federal Reserve's anticipated policy decision in October, which is expected to include a 25 basis point rate cut. As gold prices surpassed the significant milestone of $4,380/oz earlier in the week, they eventually corrected and settled near $4,120 due to profit-taking and other macroeconomic factors.

Contributing to gold's decline were substantial outflows from ETFs and a positive shift in US-China trade relations. The announcement of a preliminary consensus on key trade issues between the two nations alleviated fears of a new tariff cycle, which had previously propelled gold's ascent. US Treasury Secretary Scott Bessent commented, 'The threat of 100% tariffs on Chinese goods is effectively off the table,' reflecting increased optimism towards trade relations.

Simultaneously, this scenario started favoring risk assets, with Bitcoin gaining more than 5% during the same period. Bitcoin's rally was driven by its oversold position relative to gold, as indicated by the BTC/gold ratio reaching its most oversold level in nearly three years. This indicator signaled potential for Bitcoin's outperformance as investors realigned their portfolios to include higher-beta assets.

The BTC/gold ratio's 14-day Relative Strength Index (RSI) plunged to 22.20, marking a historic lower level since November 2022. Historically, such low readings have aligned with local lows for Bitcoin, followed by substantial recoveries. This current financial narrative underscores a market keen on balancing safer assets with higher-risk options now viewed as fertile ground for potential gains.

In parallel, the cryptocurrency sector saw notable developments, such as the proposed Batch amendment to the XRP Ledger. This amendment is set to enhance atomic transaction capabilities, particularly benefiting NFT trades by enabling secure NFT-to-NFT swaps within a single transaction. With 68.57% consensus among validators and an 80% threshold required for activation, this development emphasizes ongoing innovation within blockchain technologies.

Key Insights Table