Cryptocurrency Bitcoin Challenges Gold's 2021 Record Peaks
In the ever-evolving world of cryptocurrencies, Mike McGlone, the chief commodity strategist at Bloomberg Intelligence, has issued a cautionary note about Bitcoin's future. McGlone views Bitcoin's status as an independent asset as precarious and dependent on its ability to maintain certain valuation thresholds relative to gold.
McGlone emphasises a key Bitcoin-to-gold ratio around 35 ounces of gold per Bitcoin, which marks a pivotal level for Bitcoin's credibility as a standalone asset class in 2025. If Bitcoin falls below this threshold, it could signal a loss of confidence, leading investors to potentially shift capital towards safer, traditional assets such as U.S. Treasury bonds, especially as Treasury yields may drop towards around 1.75%, reflecting trends seen in markets like China.
Bitcoin has shown resilience and strong performance relative to equities, which strengthens its case as an alternative investment. However, gold remains the dominant store of value and benchmark. McGlone highlights that gold’s continued outperformance over stocks and cryptocurrencies signals fading investor confidence in risk assets, including Bitcoin. He suggests that Bitcoin has yet to fully establish itself as a legitimate, stable store of value and remains heavily influenced by market sentiment and broader macroeconomic conditions.
In contrast, U.S. Treasury bonds are positioned as a potential “next big trade” if Bitcoin cannot defend its value against gold. This is due to Treasuries' relative stability and appeal when volatility rises or confidence wanes in higher-risk assets like Bitcoin.
In summary, McGlone sees Bitcoin's future as an independent asset hinging on its ability to defend key valuation metrics against gold and maintain investor confidence amid competing traditional assets like bonds. As of now, Bitcoin is valued at approximately 35 ounces of gold, and if it fails to hold this level, it will signal more weakness.
It's important to note that Bitcoin holders have yet to outperform gold holders this year, considering the smaller market cap of Bitcoin. Meanwhile, U.S. Treasury bonds might emerge as the next big trade, according to McGlone, as yields in China are now trading towards 1.75%, making T-bonds more attractive.
McGlone's view contrasts with the prediction made by Fidelity's Jurrien Timmer, who previously predicted that Bitcoin might outperform gold in the second half of the year. However, as we approach 2025, the spotlight remains on Bitcoin's ability to maintain its value against gold and secure its position as an independent asset class.
References: 1. Bitcoin Dips Below Key Gold Ratio, Signaling Weakness, Says Bloomberg Strategist 2. Bitcoin's Future Hinges on Gold, According to Bloomberg Strategist 3. Gold Remains the Dominant Safe-Haven and Store of Value 4. U.S. Treasury Bonds Emerging as a Potential “Next Big Trade”
- Mike McGlone, the chief commodity strategist at Bloomberg Intelligence, thinks Bitcoin's future as an independent asset depends on it maintaining key valuation thresholds relative to gold.
- McGlone emphasizes that a Bitcoin-to-gold ratio around 35 ounces of gold per Bitcoin is a pivotal level for Bitcoin's credibility as a standalone asset class in 2025.
- If Bitcoin falls below this threshold, it could signal a loss of confidence, possibly leading investors to shift capital towards safer, traditional assets like U.S. Treasury bonds.
- McGlone suggests that U.S. Treasury bonds might emerge as the next big trade if Bitcoin cannot defend its value against gold due to Treasuries' relative stability and appeal during times of volatility or waning confidence in higher-risk assets like Bitcoin.
