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Crypto and gold debate rages on Wall Street as flows reverse

(Bloomberg) – Gold is back with a vengeance this month as the crypto rally crumbles, reigniting Wall Street debate over the link between the two putative hedge assets. Bullion funds have seen both Larger entries since October and prices are approaching $ 1,900 an ounce. In contrast, Bitcoin has plunged nearly 40% from a high of $ 63,000 and funds are registering exits. Yes, the weakness of the dollar and lower inflation-adjusted yields are the main reasons for the rebirth of gold. The volatility boosted by Elon Musk, meanwhile, has stifled some of Bitcoin’s speculative euphoria, while undermining its ambition to attract institutional crowds. Yet all of this fascinates a market cohort that points to the parallels between l digital gold and the real deal. They are both seen as hedges against inflation, commodities in scarce supply, and capture the cultural divide between young tech-obsessed traders and boomer traditionalists. Meanwhile, figures like JPMorgan & Chase & Co. and ByteTree Asset Management say the recent rise in gold seems “There is still so much confusion between Bitcoin and gold,” Charlie Morris, founder of ByteTree wrote in a note. “They coexist, and they both thrive in an inflationary environment.” In a report on the changing trends of gold and Bitcoin, Morris suggested that the flow of funds has an unusually large impact on the rise in the price of gold, and vice versa, the outflows of Bitcoin lower the prices. price. The past may be a prologue: Earlier this year, Bitcoin funds pulled institutional liquidity as fund managers bragged about a case for digital currencies to slip into gold’s place in a wallet. With economic growth booming, more than $ 20 billion then left bullion-backed ETFs in the six months leading up to April. For some strategists, the bullion market is a starting point for guessing their price predictions. for Bitcoin. In a world where investors allocate gold and Bitcoin equally to their portfolios and where the two assets converge in volatility, this would imply a valuation of Bitcoin at $ 140,000, JPMorgan previously estimated. “Needless to say, such a convergence or equalization of volatilities or allocations is unlikely. In the near future,” wrote strategists led by Nikolaos Panigirtzoglou. Since the breakthrough of the Covid-19 vaccine triggered an economic rebound in November, the exchange-traded funds that track gold sold nearly 12 million troy ounces through early May, valued at about $ 22.5 billion. Investors pulled out nearly SPDR Gold Shares ETF (ticker GLD) $ 14 billion during the period, helping to reduce the total assets of the world’s largest gold ETF by 29%. Some $ 1.6 billion was reinvested in the funds to make May the best month since July.In daily action, the direct link between gold and Bitcoin is elusive, suggesting that the link is more related to market psychology than to market psychology. flows of real money. Essays on pricing and the weakening dollar are good reasons for the metal’s current rally, and while Bitcoin’s price predictions have been dampened by the sell-off, the enthusiasm has not gone away. Bloomberg Intelligence strategist Mike McGlone, who has a price target of $ 100,000 for Bitcoin, says there is still a chance that crypto could become a digital reserve asset and that it will be worth it. to diversify, ”McGlone wrote. “The human nature of recognizing a new asset class is what we see as a primary Bitcoin carrier.” More stories like this are available at bloomberg.com Subscribe now to stay ahead with the most trusted source of business news. © 2021 Bloomberg LP


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