Bitcoin Vastly Outperforms Gold ETF on Year-Adjusted Timeframes

• Bitcoin outperformed its traditional rival Gold on a year-adjusted timeframe.
• The cryptocurrency’s spot price surged more than 50 percent in a year, with a string of geopolitical and macroeconomic factors helping its rally.
• The same period saw the SPDR Gold Trust ETF rising by more than 32 percent.

Bitcoin didn’t get its exchange-traded fund, but it surely got to beat one.

The benchmark cryptocurrency vastly outperformed the SPDR Gold Trust ETF (NYSEArca: GLD) on year-adjusted timeframes. Its spot rate surged a little above 51 percent since May 13, 2019, beating SPDR’s 32 percent returns in the same period. That helped rationalize Bitcoin as a more profitable asset than derivatives that track the yellow metal.

The upside moves in both the markets periodically surfaced due to similar macroeconomic and geopolitical scenarios. The US-Iran conflict at the beginning of 2020 assisted Bitcoin – as well as Gold and Gold ETFs, in rising hand-in-hand as convincing hedges.

Their correlation also grew strong against China’s yuan depreciation at the heights of 2019’s US-China trade war. While investors hedged their risks in gold, bitcoin’s demand boomed more as a tool to circumvent China’s tight leash on outgoing capital.

Coronavirus

The beginning of the Coronavirus pandemic outside China eventually caused a global market crash, bringing every risk-on and risk-off asset on one-side of the spectrum. As usual, bitcoin and gold fell in sync with the global stocks in March 2020 as investors’ safe-haven perceptive shifted to cash.

The U.S. Federal Reserve later introduced an emergency package to protect the economy. That followed the Trump administration’s decision to introduce a $3 trillion stimulus package. As liquidity started flowing back into the economy, both Bitcoin and SPDR registered remarkable recoveries.

Even then, Bitcoin was able to return a better short-term profit than the Gold ETF. The cryptocurrency rebounded by more than 175 percent. In comparison, SPDR recovered by a little over 20 percent from its mid-March lows.

Bitcoin Riskier

The gains in Bitcoin impressed, but its high risk-reward ratio also kept big investors from putting significant capital into its market. During the March sell-off, the cryptocurrency fell by more than 50 percent within just 24 hours.

While the broader market outlook looked at Coronavirus as the primary catalyst, bitcoin fell partially because of BitMEX, a crypto derivatives exchange, that liquidated $700 million worth of long positions in just 15 minutes. Bitcoin’s implied volatility, which measures how much the cryptocurrency risks are in the future, surged to its highest since January 9.

In comparison, the SPDR’s plunge was just a little over 15 percent – a shocking crash but not as bad as Bitcoin.

Photo by Jonathan Chng on Unsplash