Peter Schiff, the CEO of Euro Pacific Capital, says “HODLers” of Bitcoin “remain delusional” because gold outperformed Bitcoin since 2019. But, BTC actually outperformed the precious metal so far in 2020.
Schiff said:
“Since hitting its high in June of last year the price of Bitcoin has fallen by 33%. During that same time period the price of gold has risen by 27%. So, priced in gold Bitcoin has fallen by 53%. The long-term trend has clearly changed in gold’s favor. HODLers remain delusional.”
Year-to-date, Bitcoin increased from $7,153 to $9,220, by just over 28%. Gold rose from $1,518 to $1,777, by around 17% in the same period.
The weekly chart of Bitcoin. Source: TradingView.com
Comparing the price of Bitcoin and gold only justifies BTC as a store of value
In March, when the U.S. stock market crashed due to the slowing global economy, Bitcoin dropped below $4,000. On BitMEX, BTC declined to as low as the $3,500s, marking a 50% drop within several days.
In the next three months that followed, BTC rallied by more than 150%. It hit $10,440 in May, demonstrating a strong recovery from a massive correction.
Consequently, large financial institutions, including JPMorgan, acknowledged the resilience of Bitcoin.
On June 12, JPMorgan said the recovery of Bitcoin proved it has “staying power.” In previous weeks, billionaire hedge fund investor Paul Tudor Jones said BTC matures the longer it survives.
The consistent comparison between gold and Bitcoin might further strengthen the perception of BTC as a store of value.
High-profile investors in the cryptocurrency market, like the Winklevoss twins, expect Bitcoin to evolve into a more practical version of gold over the long run.
The fact that the price of Bitcoin outperformed gold in 2020 amid a pandemic could bolster the sentiment around BTC.
Bloomberg researchers similarly said that they expect the value of Bitcoin to “continue appreciating.”
In a paper, researchers at Bloomberg wrote:
“In the unlikely event of a significant change for the worst, we expect the Bitcoin price to continue appreciating. This unprecedented year of central-bank easing is accelerating the maturation of the first-born crypto toward a digital version of gold, while accentuating oversupply constraints in most of the market.”
What macro factors support gold and BTC?
In the medium-term, the demand for gold is likely to come from investors seeking safety from a potential stock market downturn.
Institutions are increasing;y entering hedge positions, favoring cash, gold, and bonds.
For Bitcoin, the May 11 block reward halving remains as its biggest catalyst moving into 2021.
Historically, the price of Bitcoin surged 10 to 11 months after a halving. The trend of BTC after the two previous halvings has led investors to be optimistic around Bitcoin.
Based on historical data and macro factors, analysts say that the probability that gold and Bitcoin would rally in tandem by 2021 remains high.