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bitcoin and gold

“Bitcoin Is Not The New Gold”, Asserts Peter Schiff

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The Bitcoin vs Gold narrative goes way back. While the gold lovers continue to side the traditional investment asset, several have been jumping parties after viewing the prospects of Bitcoin. The first and largest cryptocurrency, Bitcoin has witnessed several new members into its ecosystem and quickly went from being called “digital gold” to the “new gold”. However, some members of the financial world are still taking a dig at Bitcoin for being compared with gold.

Bitcoin Not Quite There Yet

The deflationary nature, limited supply, and store of value properties of Bitcoin have got several suggesting that the digital asset is the new gold. Despite the huge disparity in its popularity and market capitalization as well as the rate of adoption, Bitcoin has been deemed as digital gold. Even though the market cap of Bitcoin hit $342.022 billion, it seems almost dainty as compared to the market cap of gold which is over $9 trillion. Albeit this, the strategists of the banking giant JPMorgan Chase suggested that Bitcoin was soon going to take the place of gold.

While Bitcoin is a fairly new asset to the financial world when compared to gold, the king coin has managed to garner several haters. The analysts of JPMorgan suggested that institutional interest from gold was diving into Bitcoin, this analysis was condemned by the prominent Bitcoin skeptic, Peter Schiff as he went on to take a dig at Bitcoin in his latest tweet. Schiff was against the entire new gold narrative as he tweeted,

Schiff has time again expressed his hate for Bitcoin and his keenness towards gold. He went on to stress the fact that Bitcoin wasn’t the new gold. When a Twitter user hit Schiff with a “reality hurts doesn’t it?” comment, the American stockbroker responded by tweeting,

Bitcoin

 

Gold To Make Space For Bitcoin Under The Spotlight, Predicts JPMorgan Strategists

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Gold and Bitcoin are often resembled to entail similar properties. While gold continues to reign the investment side of many, Bitcoin seems to be catching up. Both the assets have been looked upon as a store of value assets, which has even led to Bitcoin being called “digital gold.” However, a dilemma pertaining to the future of gold has been addressed by analysts at JPMorgan Chase.

Gold Vs Bitcoin

Bitcoin transpired to become a valuable yet controversial asset. The regulations that have been hindering the growth of the king coin seem to have taken a break following Bitcoin’s notable price change. The emergence of Bitcoin from a mere darknet currency to one of the most valuable assets in the globe has put the fate of gold at stake. Nikolaos Panigirtzoglou, a quantitative strategist at JPMorgan Chase & Co., along with a few other strategists pointed out that people were steering towards Bitcoin as a significant amount of money was taken out of gold reserves and found shelter at Bitcoin since October.

These strategists further added that this trend would prolong over the course of time. This wasn’t limited to gold and Bitcoin alone as several institutional investors are bound to take a position in crypto assets. Elaborating on the same, the strategists cited that river $2 billion worth of inflows were seen by the Grayscale Bitcoin Trust. The outflows for exchange-traded funds backed by gold were a whopping $7 billion. The JPMorgan strategists further added,

“The adoption of bitcoin by institutional investors has only begun, while for gold its adoption by institutional investors is very advanced.”

Gold has been the investors’ favorite for the longest time now. This traditional store of value asset seems to be getting a run for its money by Bitcoin. Another classic example of how digitalization is forcing several to pull the plug on traditional assets.

The banking giant further revealed that only the king coin accounts for only 0.18% of family office assets as opposed to the 3.3% gold ETFs. Despite this, the gold seems to be safe in the short term as gold is still longing for a recovery. Shedding light on the longer term, the strategists said,

“If this medium to longer term thesis proves right, the price of gold would suffer from a structural flow headwind over the coming years.”

Bitcoin Still Too Volatile To Be A Long-Term Store Of Value Like Gold, Suggests Steve Forbes

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Bitcoin has been often compared to gold as the two entail similar qualities. Both Bitcoin and gold are considered to be a store of value assets. While gold has been viewed as an age-old investment method, several have been steering towards Bitcoin for the same. Speaking about the same, Steve Forbes, the Chairman and the Editor-in-Chief of Forbes Media appeared in an episode of What’s Ahead.

Bitcoin Not Quite There To Become The New Gold

Touted as digital gold, Bitcoin’s characteristics have pushed the coin to be matched with gold. This year proved to be exceptionally interesting for the coin. After going through a halving the king coin went on to surge by over 160% throughout this year. While several have veered into the market following this price movement of the coin, Forbes believes that it still has a long way to go in terms of taking the place of gold. He added,

“It may well become the new gold, but that day is not yet here for now gold is the best insurance against inflation.”

The volatile nature of crypto has hindered the growth of crypto. Elaborating on the same, Forbes suggested that Bitcoin would fail to embody the role of a long-term store of value asset as it is too volatile. He however agrees that Bitcoin is a good store of value asset, yet he suggests that it shouldn’t be mistaken to be better than gold.

While Bitcoin stands at $19,044.54, Forbes is still inclined towards gold. He pointed out that several crypto enthusiasts fail to see that gold entails an intrinsic value that is greater than anything else on the globe. He added,

“Experience has repeatedly demonstrated for thousands of years that fixing a currency to gold is the best way to achieve monetary stability. We did very well in the gold standard here in the U.S. from the 1790s to the 1970s achieving the highest rates of growth in human history.”

Bitcoin Decouples From Stock But Maintains Correlation With Gold; Here’s What it Means

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For most of the year, Bitcoin has seen a strong correlation to traditional indices. Given the increasing uncertainty and speculation, over the course of the year, the S&P 500, Gold, and Bitcoin were at the forefront. However, despite a rather long stint of correlation, Bitcoin appeared to be decoupling.

This was noted by the crypto-analytic platform, Santiment which noted that with Bitcoin’s massive price surge this past week, its correlation to the S&P 500 has dropped back to 0 for the first time since May on its 30-day rolling average model. Interestingly, the market data provided by the platform indicated a bullish sign for crypto after having an all-time high correlation in August.

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The reason for this is due to the fact that Bitcoin has historically “thrived” when its reliance on world markets, and other asset classes or industries, is minimal, and trading can operate independently without interference from non-crypto events as distractions.

As for Bitcoin, the world’s largest cryptocurrency’s price has continued to strengthen. Positive developments such as Paypal crypto integration as well as the rising institutional demand for BTC and Square, MicroStrategy, and Stone Ridge’s investment triggered a much-anticipated surge in Bitcoin’s price above $12k, but a clean breakout above $13K was abrupt and the reason behind it still seems to prompt much debate.

The ongoing strong technical momentum of the coin along with its latest decoupling from stocks could also possibly project that the bullish case for Bitcoin st play continued to strengthen. This, in turn, will further catapult the price of the rest of the altcoin market by extension.

Bitcoin and Gold Correlation Holds

skew bitcoingold realized correlation

Bitcoin’s growing independence in relation to stocks was very visible, it was not the case with Gold, and its correlation with the metal, which happens to be one of the crucial assets in the traditional space, continued to be strong. According to the latest Skew charts, noted despite a minor negative correlation earlier in the month, BTC-XAU’s 1-month correlation has sprung back up in action to 23.5%. This signaled that as Bitcoin matures, it will potentially trade more like gold, which is a store of value, rather than risky assets such as stocks.

Bitcoin Gears Up for Potential Decoupling from Traditional Markets

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Throughout the year, Bitcoin saw a huge correlation to S&P 500 and Gold. Most recently, Bitcoin’s correlation with traditional markets significantly increased last week when the latter took a plunge. This was followed by a massive slump of Bitcoin and the rest of the crypto market. However, Bitcoin could be gearing up for a reversal in this trend now.

According to the popular analyst Willy Woo, Bitcoin may soon decouple from the stock markets. In his tweet, Woo mentioned that this decoupling would be driven by its “internal adoption” and will eventually follow “s-curve” just how a startup grows, rather than traders and investors changing their perception about the asset has a hedge against inflation or against the unknown.

By ” internal adoption”, Woo meant long term organic growth of Bitcoin holders as opposed to hedge funds and whale traders moving capital in and out of BTC as they trade and hedge positions.

 

Strong Fundamentals

The above Glassnode chart referred by Woo noted that the number of active users on the Bitcoin network has sat at the historically highest level. This essentially implied that the broadening market participants which could eventually drive the coin’s price up.

To top that, Bitcoin’s hash rate also reached an all-time high of 150.9319 exa hash per second on the 14th of September. The miners have remained unfazed despite several pullbacks as the metric was still circling its highest value. At the time of writing, it stood at 145.8121 exa hash per second further suggesting that miners are as confident in the profitability of mining, and hence are dedicated to increasing network security.

Hash Rate

Bitcoin’s mining difficulty was also adjusted to an ATH thus making the network more secure against attacks. The growth of these metrics underscored the bullish outlook for Bitcoin’s macro price action.

skew bitcoingold realized correlation

Additionally, the one-month realized correlation spread between Bitcoin and Gold has also dropped significantly to 23.33% over the past couple of days. The monthly correlation figures had recently surged to an ATH of a whopping 75% on the 19th of September. This further reinstated the popular notion of Bitcoin being a “non-correlated asset” making the asset more attractive for investors looking to hedge during times of uncertainty in the traditional market space.

Bitcoin Correlation With S&P 500, Gold Rises as Crypto Market Takes a Plunge

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Bitcoin is often heralded as a non-correlated asset. This narrative gained traction primarily due to the fact that Bitcoin’s price has moved independently of the U.S. S&P 500 for much of its history. While by and large, this has been widely true, there have been instances when it defied this popular narrative.

Bitcoin and the cryptocurrency market sustained a major price slump. This was followed by a massive drop in the U.S. stock market. Other indices such as the German DAX and the U.K.’s FTSE also noted a significant decline.

skew bitcoinsp500 realized correlation 3

The crypto-analytic platform, Skew noted that the one-year realized correlation between Bitcoin and Wall Street’s equity index and benchmark for global stock markets – S&P500 currently stood at 52.93% quite close to its ATH. In addition, a similar case was noted with respect to Bitcoin’s one-year realized correlation with Gold which recently touched an ATH of 74% on the 20th of September before a minor dip to 63.4% two days later. This has further solidified Bitcoin’s appeal as digital gold.

skew bitcoingold realized correlation 1

Uncorrelated assets are those assets that move independently of major stock market indices. This essentially gives an opportunity for investors to “beat the market.” This is not the first time the world’s largest cryptocurrency has behaved similarly to mainstream markets. However, it was not until 2020 when this trend saw a significant upsurge.

The COVID-19 pandemic has affected markets across all sectors and crypto has not been spared as well. As the economy suffered a hit, Bitcoin and the crypto market crashed massively on Black Thursday which happened in the second week of March. It was then that the Bitcoin’s correlation with mainstream markets saw a significant spike. This was driven by fear and panic that led to investors cash in or to turn to stablecoins to hedge against the falling markets.

Despite the recent surges in correlation, the one-month metric for S&P500 as well as Gold oscillated largely within a significantly wide range and was somewhat inconsistent. It is volatile in nature and this was evidenced by its sharp fall from $10,000 to $3,800 that was witnessed during the mid-March crash. Bitcoin is still a little over 11 years old and is yet to be a sufficient hedge or a flight to safety in times of risk-off sentiment.

Gold and Silver Smashing New Records, Will Bitcoin Follow

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Discount Brokerage Platform Robinhood has made a spike in the trading activities of gold-tethered traded funds (ETFs). The data from the analytics site, Robintrack, recorded a surge in the number of Robinhood users trading SPDR Gold shares Exchange Traded Funds from 6,000 in 2019 to 26,000 this year. Silver, on the other hand, rose to record highs after moving toward $20.00 per ounce price point.

Gold Trading Performance Surges by 0.40%

Gold approached $1,950 an ounce price support after rising by 0.40 percent and trading an ounce at $1817.50. The weakening of the US dollar as a result of Covid-19 seems to have been Gold’s lifting force. Silver’s price action has taken an overnight surge of 3.0 percent to reach its current price.

Price actions of either metals gave Peter Schiff enough reason to mock bitcoin for its failure to rally strongly against Silver. The epic trader and analyst posted on Twitter that Silver was the “new bitcoin”

Schiff claimed silver was rallying high percentages over the count of 10, while bitcoin was hardly up by 2%. At the time of Schiff’s twitter post, Silver hit a 6-year high after rising by 7% to $21.15 per ounce. The leading crypto, on the other hand, stalled around $9,300 after breaking away from the $9,200 resistance on Tuesday. 

Silver is the New Bitcoin For Millennial

It’s not clear whether Silver could take the lead in making investments and become the next bitcoin; but what’s clear is that millions of millennials are hovering around platforms like Robinhood to trade in all things-assets. However, the only limitation that silver faces are that it is less liquid. On average, the supply of silver is lower compared to both Gold and Bitcoin. That’s why most of the silver directional moves post staggering records and are more aggressive. Yet, it seems millennials are more than ready to invest in anything that promises returns.

Nevertheless, Schiff said that the silver was a new kind of bitcoin with direct utility. The trader advised bitcoin enthusiasts to turn to silver and to hesitate to back up the wrong asset.