U.S. Dollar facing significant caution from the Federal Reserve as Bitcoin poses a $24 trillion gold-valued challenge

Significant Caution from the U.S. Federal Reserve as Bitcoin Threatens a $24 trillion Gold Market Value

In a dramatic turn of events, the digital currency, Bitcoin, has been making headlines as it surges to record highs and threatens to overtake gold as the preferred safe-haven asset among investors.

The bitcoin price has doubled since last year, reaching an all-time high of $124,000 per bitcoin in August. This rapid rise has caused a stir in the financial world, with some predicting a potential $84 trillion shock in the making. The financial markets research company, Bespoke, reports that Bitcoin ETF assets are worth $150 billion, closing in on the assets under management (AUM) of gold ETFs, which stand at $180 billion.

The surge in the bitcoin price has coincided with a significant increase in gold's price as well. Gold, traditionally a safe-haven asset, has seen its price rise from $2,500 an ounce 12 months ago to $3,600 today. This concurrent rise has sparked concerns and heightened fears that bitcoin could replace gold as the preferred safe-haven asset for investors seeking exposure to a scarce, non-governmental or corporate asset.

The World Gold Council, in response to these fears, is developing a digitalized form of gold to make it compatible with various financial products. David Tait, CEO of the World Gold Council, aims to standardize the digital layer of gold to maintain its position as the world's safe-haven asset.

Meanwhile, Goldman Sachs analysts consider gold their highest-conviction long recommendation in the commodities space. However, they also believe that bitcoin could challenge gold's safe-haven asset crown. In a potential scenario, Goldman analyst Samantha Dart predicts that gold prices could rise to $5,000 per ounce if US President Donald Trump triggers a conflict with the Federal Reserve, causing global investors to lose confidence in bonds, stocks, and the dollar. This could lead to a significant shift from the large treasury market to gold, potentially driving the price to that level.

The massive $4 trillion rally in bitcoin has also caught the attention of celebrities, causing them to invest in crypto. However, the Fed's independence from the White House has been a subject of concern, with Trump attacking Fed chair Jerome Powell and threatening to fire him, sparking fears about the central bank's autonomy.

Matt Mena, crypto research strategist at 21Shares, believes bitcoin offers an "ultimate hybrid profile" as it serves as digital gold for safety and has potential for asymmetric upside as a risk-on asset. This dual nature of bitcoin could make it a formidable competitor to gold in the future.

As we approach the fourth quarter, historically bitcoin's strongest quarter, buying pressure could accelerate into year-end. With the potential for a $84 trillion shock and the threat to gold's safe-haven asset crown, the race between bitcoin and gold is one to watch in the coming months.