Palash Udhwani an Investment Analyst with Kunji explains the similarity between Bitcoin and gold which is a lot by the way.
Touted as digital gold, Udhwani said, “BTC has a lot of similar characteristics to gold, namely global availability, high demand, and low supply. The supply and emission of BTC in the market cannot be altered as it is algorithmically programmed. The same factor helps in driving the price of BTC over time. The total emissions of BTC in circulation decrease over time as emissions get halved every four years.”
As per the data from Kunji which is India’s first crypto asset management platform, in the past five years, Bitcoin has outperformed gold in the past five Diwali.
Bitcoin witnessed a gain of 312.5% on the Diwali of October 19, 2017, while gold witnessed a surge of 29.5%. Further, on Diwali held on November 6, 2018, Bitcoin recorded gains of 196.3% versus gold soaring by 36.1%, however, it needs to be noted that the yellow metal saw an upside in the gains while Bitcoin’s gain narrowed from the 2017 levels. Notably, on Diwali which was held on October 27, 2019, Bitcoin and Gold both saw a narrowing in their gains to 99.9% and 11% respectively. However, during Diwali 2019, Bitcoin still performed better.
During November 14, 2020, Diwali, Bitcoin recorded a gain of 18.7%, while gold however tumbled by 11.6%. But on the Diwali of November 4, 2021, bitcoin declined drastically by 68.9% versus gold which only shed about 6.7%. In 2021, gold performed better than Bitcoin. Overall, in 5 years, Bitcoin gave more returns than gold.
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The returns on BTC might look attractive, but the broader crypto landscape provides us with many more opportunities to extract higher alphas. (Kunji data)
Over the five years, while the average return on gold investment would have been around 11%, the same for BTC is around 111.7%.
For a competitive quantitative analysis, Udhwani said, if you had bought gold worth ₹50,000 for each year starting in 2017 on Diwali, your current portfolio value on an investment of ₹2,50,000 would have been ₹2,79,150. If you had purchased BTC with the same, the return would have been ₹5,29,250.
Udhwani said, the returns on BTC might look attractive, but the broader crypto landscape provides us with many more opportunities to extract higher alphas. If you had taken positions in BTC along with a set of promising quality altcoins, a similar trend could be seen in the same.
Giving an example, Udhwani said, you invest about $600, around ₹50,000, across six good quality altcoins from the previous 5 Diwali. The same with a combination of BTC would have given a return of 659.624 %, and a pure altcoin
play would have achieved a 1207% return. The altcoins used here in the strategy are ETH, BNB, LTC, XRP, ADA, and LINK.
According to the expert, BTC, being a vital asset with a history of more than a decade, has also inspired a lot of other decentralised projects and protocols, which provide huge upside potential if proper strategic positions and risk management are taken.
Talking about the current state of the bitcoin-gold correlation, Udhwani said, until the market achieves its peak hawkishness, pressure on gold and other semi-investment metals like silver and platinum is likely to persist. As investors are drawn in by a strong dollar despite rising interest rates, the correlation between bitcoin and gold has reached its highest level in the past 12 months.
Also, Udhwani added, “Although Bitcoin is regarded as “digital gold” and a hedge against inflation, investors don’t agree much like the yellow metal. As inflation has risen over the past several months, the value of Bitcoin and gold has drastically decreased. It resulted in a correlation at a year-high of +0.4. A strong dollar and high bond yields may lure investors away from the precious metal and Bitcoin.”
On Saturday, at the time of writing, Bitcoin is trading above the $19,200 mark and its 24 hours gain is around 1.5% on CoinMarketCap.
As per Good Returns data, 22 carat gold in India is available at ₹47,000 in 10 gram on Saturday up by ₹750 from the previous day. While the 24 carat in 10 gram is priced at ₹51,280 apiece higher by ₹830 from the previous day.
Meanwhile, on Friday, at MCX, gold futures maturing December 5 ended at ₹50,635 up by ₹492 or 0.98% from the previous day’s levels.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
