Bitcoin

Here’s Why Bitcoin’s Outperformance of Gold Isn’t Impressing One Prominent Investor

Cole Petersen | May 06, 2020 | 23:00

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• Bitcoin’s recent recovery from its mid-March lows has allowed it to outperform gold and virtually all major markets this year
• This strength has even allowed it to see over twice the returns that gold has seen – boosting the “digital gold” narrative that was popularized in 2019
• One prominent investor isn’t impressed with BTC’s performance, however, and believes that the risk-reward ratio still makes it a bad investment

Bitcoin has seen some extraordinary price action throughout 2020. It rallied from its yearly open around $7,000 to highs of $10,500 in mid-February, before then beginning a capitulatory descent that led it to lows of $3,800.

The rebound from these lows has allowed it to erase virtually all the losses that had come about as a result of the recent downtrend and has also allowed it to post a stark outperformance of virtually every major market.

In spite of this, one prominent investor isn’t impressed with Bitcoin’s 27% year-to-date climb and is explaining that on a risk-adjusted basis, BTC’s outperformance of gold still makes it an inferior asset.

He also notes that he anticipates the benchmark cryptocurrency to see further losses in the coming five days as its highly anticipated mining rewards halving fast approaches.

Bitcoin Outperforms Virtually All Traditional Markets in 2020

Bitcoin’s intense uptrend seen throughout the past couple of months has allowed it to climb nearly 30% from where it started the year.

The vast majority of these gains have come about throughout the past quarter, as BTC has climbed nearly 44% during this time frame, and roughly 5% this month alone.

This marks a notable outperformance of virtually every major traditional market – which have widely faced unprecedented levels of weakness in recent times due to the Coronavirus pandemic.

Currently, the S&P 500 is trading down just under 12% from where it started 2020.

Throughout the past quarter, the benchmark stock index has been able to climb 11%, allowing it to post a notable rebound from its recent lows.

Gold is currently trading up 11% YTD, and its upwards momentum has slowed as the traditional markets begin flashing signs that a recovery is imminent.

Image Courtesy of Skew

This Prominent Investor Isn’t Impressed by BTC’s Returns

Although Bitcoin is one of the best performing assets this year, Peter Schiff – an outspoken gold bug and Bitcoin critic – explained that the risk-adjusted returns seen by BTC still make it inferior to gold.

“Bitcoin bugs are touting Bitcoin’s slight YTD outperformance over gold as a sign of Bitcoin’s superiority to gold. On a risk-adjusted basis, Bitcoin’s 23% gains verses gold’s 12% rise is far less impressive. With the halving just 6 days away, Bitcoin’s YTD gains can fade fast,” he said.

It is largely thought that the mining rewards halving slated to occur in roughly 5 days will actually boost Bitcoin, as it will disincentive selling amongst miners in the short-term, while reducing the crypto’s inflation rate in the long-term.

Featured image from Unplash.