Comparison of the Price Determination Mechanisms of Gold and Bitcoin under the Expectation of Interest Rate Cuts: A Theoretical Analysis based on Monetary Attributes and Risk-aversion Demands

Abstract

Both gold and Bitcoin have received valuation support under the expectation of interest rate cuts, but there are fundamental differences in their price determination mechanisms. Gold relies on the real interest rate and the credit framework of the US dollar, and the interest rate cut conveys its effect by lowering the real interest rate and stimulating the demand for risk aversion. Bitcoin, on the other hand, depends on the liquidity expectations and risk appetite channels, and its price reaction is more nonlinear and self-reinforcing. The two fundamentally differ in their institutional basis of monetary attributes, hedging functions, and expected reaction patterns. Gold is more stable, while Bitcoin is closer to high-beta assets.