Why Bitcoin Has Outperformed Gold ETF on Yearly Adjusted Timeframes

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  • Bitcoin has outperformed gold exchange-traded funds (ETFs)
  • Increased activity in crypto gambling has contributed in this period

Even though Bitcoin (BTC) is yet to get an ETF approved, this hasn’t stopped it from outperforming one. The top cryptocurrency has been outdoing the SPDR Gold Trust ETF (NYSEArca: GLD) on yearly adjusted timeframes. Its spot rate has surged above 51% over the past year, thus beating SPDR’s 32% returns within the same period. Comparisons always exist with Bitcoin seen as the digital gold; however, detractors are quick to point out its volatility as the reason why it’s not equivalent to gold as a good store of value. But based on our analysis, BTC’s performance over the past year shows it’s a more profitable asset than the derivatives that track gold.

Macroeconomic and geopolitical scenarios played a vital role in the positive movements in both markets over the period. At the start of 2020, the US-Iran conflict helped BTC, gold and gold ETFs rise together as convincing hedges. And their correlation also did grow strong against the Chinese yuan as it depreciated at the peak of the 2019 US-China trade war.

As investors hedged their gold risks, Bitcoin’s demand was peaking as people used it to go around China’s tight leash on outgoing capital. However, the spread of the coronavirus to other locations outside China sparked a global market crash. This led to Bitcoin and gold to crash as other assets fell in March as investors perceived cash as a safer haven at the time.

But, the US Federal Reserve and governments around the world would introduce emergency stimulus packages to protect their economies. As liquidity began to flow back, both BTC and SPDR managed incredible recoveries. Even then, Bitcoin outperformed the Gold ETF on short-term profits by more than 175% to manage to rebound.

In comparison, SPDR bounced back just a little over 20% from its mid-March lows. Even though BTC gains were impressive, its high risk to reward ratio meant big investors avoided putting significant capital into its market. For example, during the March sell-off, BTC fell by more than 50% within 24 hours. While many saw the coronavirus as the catalyst, the sharp drop was due to BitMEX liquidating USD 700 million worth of long positions in just 15 minutes. In comparison, the SPDR fell by only over 15%, which was shocking but still not as unfortunate as Bitcoin.

Betting – One of the Drivers of Bitcoin Price

Increased usage is another reason driving the price of Bitcoin up. On top of the store of value use case, Bitcoin has long been recognized as a real-world use case in online gambling. And industry figures in that sector show that this activity has been picking up in this period of lockdown — unsurprising as people are confined to homes and forced to seek online alternatives.

Many digital casinos and sportsbooks have been taking advantage, with the likes of Sportsbet, Fairlay, and others, all trying to capitalize on the additional focus from players seeking to gamble in online casinos and betting on platforms. Whether it’s placing bets on e-sports tournaments, or regular casino games like roulette or even crypto-centric games like dice, or even trading-centric games like AlphaPlay where punters bet on the price movement of digital assets using top crypto like BTC, ETH, EOS, and gambling favorite TRX.

True to crypto ideals of privacy, the new crop of trading-based gambling platforms are now allowing no-registration, no-deposit accounts, using data plugged straight from reputable exchanges like Binance. They are also getting a lot more sophisticated now, like AlphaPlay holding an ongoing token sale to develop a system employing smart contracts to distribute turnover as bonuses, prizes and referral fees to token holders.

Bitcoin is believed to be extensively used within the betting and gambling industry even though it is tough to verify the actual numbers. Numerous people reside in countries where gambling is banned and resort to cryptocurrencies to satisfy their desires. Although betting using Bitcoin and other cryptocurrencies is only in its early stages, many platforms are quickly adopting crypto betting, with many sites popping up that support bets using cryptocurrencies. This trend is expected to grow in the future, and Bitcoin demand and utility can count on contributing factors from this industry.

Halving Effect On the Price

Also, the halving that took place on 11 May 2020, a day earlier than expected due to the speed of the network, has played a significant role lately, fueling Bitcoin’s price. Investors are quite bullish on the price of BTC, given that past halvings’ have led to price peaks. After the first halving in 2012, Bitcoin rose 90 times from the USD 10 region to around USD 1,180.

The second halving in 2016 saw BTC rise from USD 600 to the USD 2,800 area in the following months before eventually peaking at USD 20,000 by the end of 2017.

Even though its just a few days after the third halving, BTC price has had significant movement, especially from its March lows, where the price sunk below the USD 4,500 level. But, since then, the price has doubled, and it’s currently trading above USD 9,400, and many experts are quite bullish on the price.

Adam Back, CEO of Blockstream, sees Bitcoin exceeding its all-time high price by the end of the year chiefly due to halving and other technology fundamentals. He is quite optimistic, seeing the price going as high as USD 100,000.

Paolo Ardoino, who serves as the CFO at Bitfinex, says he doesn’t see Bitcoin going below the USD 6,000 mark in 2020 and expects the coin to hit at least USD 20,000 by the end of the year. Another bullish prediction comes from Alex Mashinsky, CEO of Celsius, who sees the price of BTC going above USD 25,000 in the months that follow halving.

After Bitcoin was named the best performing asset of the past decade, we see no reason it won’t dominate the next one. And as the industry gets bigger in the future, this will push its price even higher.


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Image Courtesy: Unsplash
Contributor: Andrey Sergeenkov

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