Gold is Having Its Month While Bitcoin is Stuck in a 'Digital Copper' Phase
As bitcoin (BTC) crashed from its all-time high, gold is seeing a rally, with traditional investors returning to this metal and away from BTC - which, a banker claims, is now more similar to copper than gold.
At 7:16 UTC, the price of gold is up by almost 7% in the past 30 days. It's trading at almost USD 1,900 per ounce, and has recovered most of its losses in 2021.
At the same time, BTC is changing hands at USD 37,109, after it dropped 35% over the last month. While it too started strong in April, hitting its new all-time high fourteen days in, of USD 64,804 (per Coingecko), bitcoin then saw a sharp drop that began with the second week of May, lasting for some two weeks, before consolidating in the USD 32,000 - USD 40,000 range.
Based on this, gold has vastly outperformed bitcoin in May alone. Meanwhile, to keep things in perspective, when we zoom out, we see a notably different picture.
In the past year, gold is up almost 12% and 53% in the past 5 years. In these same time periods, BTC went up 264% and 6,787%, respectively.
But Jeff Currie, Head of Commodities at investment banking giant Goldman Sachs, claims that BTC is much more similar to copper than to gold.
"Digital currencies, they're not substitutes to gold. If anything, they'd be a substitute to copper, and the reason I argue that is they're pro-risk, they're risk-on assets. [...] If anything, you would argue that bitcoin substitutes against risk-on inflation hedges, not risk-off inflation hedges," he told CNBC.
Currie went on to say that gold hedges "bad" inflation, while bitcoin and copper hedge "good" inflation.
However, Tom Jessop, President of Fidelity Digital Assets, reminded that the boom and bust cycles are a part of bitcoin's maturation as an asset class.
Per Jessop, the predominant narrative among the company's clients when it comes to BTC is still the digital gold narrative. It started driving the market higher following the COVID-19 pandemic onset, with a number of clients becoming concerned about the fiscal and monetary stimulus and monetary inflation.
A smaller number of investors are starting to look at BTC from the asset allocation standpoint, he said, while some see it as a network effect opportunity.
In either case, per digital asset investment firm CoinShares June 1 report on digital asset fund flows, outflows remain focused on bitcoin investment products, with minor outflows of USD 4m seen last week, bringing the total outflow over the last 3 week period to USD 246m, or 0.8% of assets under management. Inflows into these products remain positive for this year though, totaling USD 4.4bn. Meanwhile, ethereum (ETH) resumed inflows totaling USD 46m last week and ETH achieved its highest market share, peaking at nearly 27% of all investment products last year. ETH inflows reached USD 973m this year.
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