Bitcoin “Kills” Gold on a Risk Adjusted Basis: Macro Analyst
- Bitcoin’s recent price action has scared analysts.
- The cryptocurrency slipped around 3% even after Jerome Powell announced higher inflation expectations/targets.
- Gold has also moved lower, shocking investors thinking scarce assets only move up in the ongoing macro environment.
- Bitcoin is still a great buy on a macro time frame, though, according to Raoul Pal.
- Pal added that he thinks BTC remains the better macro bet than gold, despite the precious metal’s long-term track record.
- Raoul Pal is the chief executive of Real Vision and is a Wall Street veteran, having headed a division at Goldman Sachs.
Bitcoin Remains a Great Macro Trade: Wall Street Vet
Raoul Pal, CEO of Real Vision, thinks Bitcoin and gold remain in a good spot from a macro perspective despite recent weakness:
“Most people don’t understand the latter but is simply put, Powell has shown that there is ZERO tolerance for deflation so they will do ANYTHING to stop it, and that is good for the two hardest assets – Gold and Bitcoin. Powell WANTS inflation. I don’t think he gets true demand push inflation but he will get fiat devaluation, in conjunction with the other central banks all on the same mission.”
Devaluing fiat currencies will benefit both Bitcoin and gold, which both are scarce relative to other asset classes.
For the time being, gold’s growth in market supply is lower than that of Bitcoin. But according to Pal, the leading cryptocurrency could outperform the precious metal this market cycle.
“Overall, I think #Bitcoin outperforms gold. Gold can go up 2x or 3x or even 5x while bitcoin can go up 50x or even 100x. Gold has maybe 25% downside and Bitcoin 50%, so risk adjusted $BTC kills it. However, I own both but a LOT more BTC (and some ETH). Over time, all will rise again. I’m buying more BTC and ETH as the price falls and my gold is in a vault not to be touched…”
I know bitcoin and gold are selling off right now and may go further but with Powell today, it tells you they have no desire to raise rates and a skewed desire to print more. That plays to the inherent upside skew in both assets.
I think they both rise over time in inflation 1/
— Raoul Pal (@RaoulGMI) August 28, 2020
Any Near-Term Threats?
Short-term risks to Bitcoin, though, are still present.
An analyst recently shared the chart below. It shows that the Tom Demark Sequential printed a “sell 9” candle on the S&P 500’s two-week chart. This is the first instance of this signal since the start of the year, just a month prior to the March capitulation.
Bitcoin stands to correct if stocks do due to the correlation that has formed in macro markets as of late.
Chart of the S&P 500's price action over the past few years with a moving average and Tom Demark Sequential analysis by Bitcoin trader "Crypt0mer" on Twitter. Chart from TradingView.com
Photo by Giuseppe Famiani on Unsplash Price tags: xbtusd, btcusd, btcusdt Charts from TradingView.com Bitcoin "Kills" Gold on a Risk Adjusted Basis: Macro Analyst