Gold saw its worst day in years, falling more than 5%, which fueled Bitcoin’s rally and pushed the crypto market higher.
Summary
- The crypto market is rallying as Bitcoin almost reaches $114,000
- Gold plunged over 5% intraday, likely due to overextension
- Crypto market sentiment may be shifting to neutral territory
Gold is crashing, and Bitcoin is rallying, as markets see a dramatic reversal of typical safe-haven behavior. Bitcoin rose sharply on Tuesday, October 21, climbing to a daily high of $113,996.35, as gold was on track for its steepest daily decline in five years.
The rally comes as crypto market sentiment hovers near its lowest levels in months, with Bitcoin (BTC) struggling to break out of the $110,000 zone. The rally also coincided with a slight improvement in market sentiment.
At the same time, gold has retreated from Monday’s record high of $4,381 per ounce, falling 5.5% to a weekly low of $4,115.26. The correction, which is on track to be its worst day since 2020, is likely due to traders’ overextended long positions.
Why is crypto up today?
According to several analysts, the most likely reason for the gold crash was extreme overbought conditions in the markets. In fact, gold prices were up 25% over the last two months alone, due to extreme shifts in macroeconomic conditions. Namely, new tariffs against China hurt both crypto and stocks, while gold rallied.
“The mere fact that we have rallied $1,000 in six weeks . . . it is indicative that prices are overly elevated, we are in the stratosphere,” said Nicky Shiels, analyst at MKS Pamp.
This increase in the price of gold also made Bitcoin relatively less attractive as a safe-haven asset. With the latest correction in gold, investors in alternative assets may come back to Bitcoin, which could boost the crypto markets overall.
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