Bit­coin, Gold and S&P’s 2019 script: BTC and gold thrived in eco­nomic col­lapse, while eq­uity sur­vived

No-sur­prise that BTC is most-prof­itable in­vest­ment

AMBCrypto Weekly - - News -

Change is in­evitable, from phys­i­ol­ogy to psy­chol­ogy, agri­cul­ture to au­to­mo­biles and fic­tion to fi­nance, ev­ery as­pect of so­ci­ety has seen a wave of change in the past few decades. Bit­coin, a dig­i­tal cur­rency owned by no one per­son but for ev­ery­one, was thought to be an act of “fic­tion,” but in the years since, it has be­come an im­per­a­tive part of “fi­nance.”

There’s no-sur­prise that in the past decade, Bit­coin has been the most-prof­itable in­vest­ment. Bank of Amer­ica [BoA] Se­cu­ri­ties re­cently con­cluded that a $1 in­vest­ment in Bit­coin, in 2010, now would be worth over $90,000. The other prom­i­nent SoVs that has long con­tested against Bit­coin, didn’t fare that well. De­spite many stat­ing that it’s in a golden pe­riod, a $1 in­vest­ment in gold has re­sulted in a whop­ping 34 per­cent re­turn in 10 years, stack­ing $1.34.

On the eq­uity front, Amer­i­can com­pa­nies dom­i­nated the decade, the na­tion’s do­mes­tic stock-mar­ket re­turned 246 per­cent, turn­ing a $1 in­vest­ment to $3.46 in 10-years.

Two long-stand­ing foes of Bit­coin - gold and the US stock-mar­ket were pal­try against the cryp­tocur­rency in the 10-year re­turn chal­lenge; how­ever, in­vestors still look to them for val­u­a­tion, and refuge dur­ing a cur­rency cri­sis. Co­in­ci­den­tally, in 2019, the two as­set classes have seen an in­ter­est­ing move­ment with Bit­coin- on for and one against.

Eq­uity’s Essence

While the past 10 years saw the United States see the great­est eq­uity-re­turns, the past 12-months have not posited it at the top. Bit­ter ri­val China saw its stock in­dex the CSI300 out­per­form the S&P500 by 3 per­cent through the year. In terms of tech­nol­ogy, and e-com­merce Chi­nese com­pa­nies like Baidu, Ten­cent and Alibaba made re­mark­able gains.

The SPX saw two brief-cy­cles of down­turns ow­ing to the trade-war with China, but is slated to end the year on a 26 per­cent in­crease. Mean­while Bit­coin, YTD, is up by a 102 per­cent. De­spite both the as­sets per­form­ing well, they moved in op­po­site di­rec­tions through 2019.

Gold’s Glow

By gold-stan­dards, volatil­ity was high, see­ing a surge till Fe­bru­ary fol­lowed by a slump to mid-May. Coin­ci­dently, as the Bit­coin-mar­ket was lam­bast­ing gold in a cu­rated ad-cam­paign, the com­mod­ity bot­tomed out and since then saw a con­sis­tent in­cline.

Bit­coin did see a leg up against gold, par­tic­u­larly dur­ing the be­gin­ning of the sec­ond-quar­ter of the year. When Bit­coin surged on April 2, and con­tin­ued through the month, dou­bling its YTD price, XAU was up by a mere 7 per­cent, am­pli­fy­ing the calls of a new SoV.

While the two as­sets were jostling for al­ter­nate-dom­i­nance, a slew of po­lit­i­cal earth­quakes pushed them to­gether.

Cur­rency crashes from Ar­gentina to Turkey, protests in Venezuela and Hong Kong and mone­tary-ma­nip­u­la­tions in China and the US saw the two be­come “safe-havens.” Ac­cord­ing to Shaun Djie, CEO of Digix, a blockchain com­pany pro­vid­ing to­kens for gold, who told AMBCrypto,

“This year has seen the cor­re­la­tion be­tween BTC and gold be­come in­creas­ingly prom­i­nent, edg­ing closer to­wards per­fect lock­step by the mid­dle of the year. From June to Septem­ber, the gold and BTC mar­kets fol­lowed ex­tremely sim­i­lar tra­jec­to­ries.”

Uni­ver­sal Un­cer­tainty

While global mar­kets turned into trou­ble, Bit­coin and gold turned to each other. Po­lit­i­cal and eco­nomic tur­moil was ram­pant through 2019, and in sev­eral coun­tries, con­cerned-cit­i­zenry looked at them as a hedge, against their fall­ing econ­omy and cur­rency.

Hong-Kong:

Un­doubt­edly, one of the most press­ing po­lit­i­cal is­sues in the world was the Hong Kong protests against the ex­tra­di­tion bill. The fi­nan­cial-haven of East Asia saw a pre­mium on the price of Bit­coin in Hong Kong dol­lar [HKD], as cit­i­zens be­gan look­ing at cap­i­tal flight away from main­land sur­veil­lance.

South-Amer­ica:

South Amer­ica was lit­tered with cases of run­down eco­nom­ics. Venezuela, an early ‘backed to a cor­ner’ crypto-adopter saw spikes in their Bit­coin vol­ume. In 2019 alone, over VES242 mil­lion worth of BTC was ex­changed for lo­cal fiat, not to men­tion Venezuela’s af­fair with their own dig­i­tal cur­rency and other pri­vate cryp­tos.

The Lo­calBit­coins-Venezuela vol­ume be­gan to shoot up in Oc­to­ber 2018 and peaked in June 2019, surg­ing as high as $120 mil­lion in Bit­coin.

US-China Trade War:

When the un­stop­pable force met the im­mov­able ob­ject, there were col­lat­eral gains. The trade war be­tween US and China saw a re­treat into safe-haven as­sets.

The tus­sle be­tween the two eco­nomic gi­ants peaked in mid-2019. In July, the Fed­eral Re­serve an­nounced rates cut, for the first time in over a decade, caus­ing the big­gest SPX weekly-drop since Novem­ber 2018. China, re­sponded to this by de­valu­ing its cur­rency, earn­ing it the ti­tle of “cur­rency ma­nip­u­la­tion.” While the SPX and the dol­lar were drop­ping, BTC and XAU looked up,

Both gold and Bit­coin saw par­al­lel move­ment, as the trade-war slumped the SPX. Bit­coin was hold­ing onto its June YTD-high of $13,800, gold saw its big­gest 2019 weekly-gain, in­creas­ing by 3.92 per­cent in the first week of Au­gust to $1,492/ounce. Alex Saun­ders stated that the in­verse re­la­tion­ship be­tween the S&P and the two non-tra­di­tional fi­nan­cial as­sets “re­mains strong.”

The chart shows the S&P slump­ing while both gold [or­ange] and Bit­coin surge.

Look­ing at the larger pic­ture, eToro in a Busi­ness In­sider re­ported study, stated that be­tween 19 May, 2019 - 19 Au­gust, 2019 there was a 284 per­cent surge in BTC trades com­pared to prior to the trade-war, while gold’s price in­creased by 73 per­cent. The trad­ing plat­form high­lighted three dates where BTC-trad­ing dou­bled and gold moved-up con­sid­er­ably,

May 13: China’s $60 bil­lion tar­iff im­po­si­tion on US goods, gold po­si­tions in­crease by 108 per­cent and Bit­coin by 139 per­cent.

June 25: News of the Wash­ing­ton D.C.’s de­lay on ex­tra tar­iffs, Bit­coin po­si­tions move up by 40 per­cent and gold by 26 per­cent.

Au­gust 13: An­other US tar­iff de­lay, gold po­si­tions in­crease by 60 per­cent and Bit­coin by 123 per­cent.

Not just con­fined to the Pa­cific, po­lit­i­cal and eco­nomic tur­moils the world over have seen a dig­i­tal and tra­di­tional gold surge. While, from an in­sti­tu­tional point of view, com­pared to the two vet­eran in­vest­ments, Bit­coin is not “a mean­ing­ful in­vest­ment,” ac­cord­ing to Chainal­y­sis chief economist Philip Grad­well, this does not “pre­vent it from be­ing a po­lit­i­cal hedge.” He told AMBCrypto,

“There does seem to be in­creases in bit­coin de­mand in po­lit­i­cally tur­bu­lent coun­tries. How­ever, this de­mand is small rel­a­tive to the de­mand for bit­coin as a spec­u­la­tive as­set.”

Shaun Djie noted that the Bit­coin and gold have shown “in­verse cor­re­la­tion,” with tra­di­tional mar­kets. The source of these cor­re­la­tions, is how­ever not quite grounded in fact, David Ger­ard, author of At­tack of the 50 Foot Blockchain, told AMBCrypto that this ‘cor­re­la­tion,’ can be at­trib­uted to one of the many ‘cheap nar­ra­tives,’ float­ing in the mar­ket.

Ed­wards did ac­knowl­edge that the two as­sets found a “spate of grow­ing cor­re­la­tion” dur­ing that pe­riod, which has since passed. Not one to write off the link, he added that a longer pe­riod is re­quired to study the cor­re­la­tion, or lack thereof,

“We will likely re­quire many more years to con­firm if a cor­re­la­tion be­tween Bit­coin and Gold ex­ists.”

Bit­coin, gold and the S&P500 rep­re­sent three dif­fer­ent par­a­digms of the mar­ket, each hav­ing their own army.

For ev­ery Mark Cuban, who backs the banks and calls Bit­coin and gold ‘use­less,’ and Peter Schiff who de­cries Bit­coin’s rise and praises gold there is a Max Keiser who shouts “ev­ery fiat is go­ing to zero,” and an An­thony Pom­pli­ano who re­lent­lessly tweets, “Long Bit­coin, Short the bankers.”

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