What BTC price slump? Bitcoin outperforms stocks and gold for 3rd year in a row


Bitcoin (BTC) could also be down over 30% from its file excessive of $69,000, however it has emerged as one of many best-performing monetary property in 2021. BTC has bested the US benchmark index the S&P 500 and gold.

Arcane Analysis noted in its new report that Bitcoin’s year-to-date efficiency got here out to be practically 73%. Compared, the S&P 500 index surged 28%, and gold dropped by 7% in the identical interval, which marks the third consecutive yr that Bitcoin has outperformed the 2.

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Bitcoin vs. S&P 500 vs. gold in 2021. Supply: Arcane Analysis, TradingView

On the core of Bitcoin’s extraordinarily bullish efficiency was higher inflation. The U.S. shopper worth index (CPI) logged its largest 12-month increase in 4 a long time this November.

“Most economists didn’t see the excessive inflation coming, as witnessed by the 1-year forward shopper inflation expectations,” the Arcane report learn, including:

“With its 73% acquire within the extremely inflationary 2021, Bitcoin has confirmed itself to be a wonderful inflation hedge.”

Inflation 2021: Precise CPI vs. Anticipated CPI. Supply: BLS, New York Fed

Bitcoin holdings grew amongst institutional funding automobiles

Free financial insurance policies and a sustained concern of upper inflation additionally prompted mainstream monetary homes to launch crypto-enabled investment vehicles for his or her wealthy purchasers in 2021.

Arcane reported an influx of 140,000 BTC (~$6.56 billion) throughout spot- and future-based Bitcoin exchange-traded funds (ETF) and bodily backed exchange-traded merchandise this yr.

Bitcoin exchange-traded fund holdings. Supply: ByteTree, Arcane Analysis

That prompted extra Bitcoin models to get absorbed into funding automobiles, underscoring a larger institutional demand for the cryptocurrency.

In distinction, gold-backed ETFs witnessed an outflow of $8.8 billion in 2021, in response to the World Gold Council’s report revealed this December.

International gold-backed ETF flows. Supply: World Gold Council

Volatility behind superior efficiency?

Nonetheless, Bitcoin’s comparatively superior efficiency in 2021 has included intervals of excessive volatility.

Many analysts consider that excessive worth fluctuations hold Bitcoin from changing into a super inflation hedge. That features Leonard Kostovetsky, a finance professor at Boston Faculty, who recalled in his weblog put up that there have been 13 days in 2021 when BTC’s price has moved over 10% in a single path. He wrote:

“It appears unusual to suppose that an individual who’s fearful about holding {dollars} as a result of they misplaced 7% of their worth over the past yr can be snug holding Bitcoin which may (and sometimes does) lose that a lot worth in a single day.”

Arcane, too, acknowledged Bitcoin for having been more volatile than the S&P 500 in 2021, noting that the cryptocurrency “behaved like a risk-on asset” by merely amplifying essentially the most important inventory market actions.

The researcher cited VIX, a measure of the expectation of volatility based mostly on S&P 500 index choices, to exemplify the connection between Bitcoin and inventory markets. It famous that BTC’s worth fell exhausting each time VIX readings spiked in latest occasions, underscoring that institutional traders viewed Bitcoin as a risk-on asset.

Bitcoin vs. VIX. Supply: Arcane Analysis, TradingView

Consequently, Bitcoin’s potential to fall harder within the wake of a inventory market correction additionally grew to become increased. Arcane additionally famous {that a} bearish 2022 for the S&P 500 could find yourself wiping a giant portion of Bitcoin’s positive aspects.

“Due to this fact, pay attention to inventory market headwinds within the subsequent yr and their doable implications for bitcoin’s short-term worth trajectory,” it added.

Associated: Arcane Research releases its crypto predictions for 2022

However Aristides Capital managing member Chris Brown went far in predicting an all-and-all Bitcoin doom in 2022. He acknowledged that cryptocurrencies may face large selloffs forward because the U.S. Federal Reserve ends its $120-billion-a-month asset-purchasing program adopted by three price hikes subsequent yr.

BTC/USD weekly worth chart vs. Federal Reserve stability sheet. Supply: TradingView 

“If the Fed actually does hike charges sufficient to generate profits significantly much less unfastened, or if markets consider they are going to, you will see sure areas of hypothesis come to a screeching halt,” Brown mentioned, including:

“The prime instance of such asset hypothesis is cryptocurrency; right here lies $2.64 trillion of ‘wealth’ that’s backed by nothing and generates no money flows.”

The views and opinions expressed listed here are solely these of the creator and don’t essentially mirror the views of Cointelegraph.com. Each funding and buying and selling transfer includes danger, you need to conduct your individual analysis when making a call.