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The price of Bitcoin jumped more than 45% last month, with around half of those gains recorded in the final week, as demand for the long-awaited spot Bitcoin ETFs hit a fever pitch. Combined daily trading volume for the 10 ETFs was a jaw-dropping $7.7 billion on Wednesday alone, fueled by institutional speculation and leveraged bets that pushed the price of the underlying asset to a near-record high.
By Frank Holmes (an edited and abridged version by the Managing Editor of munKNEE.com – Your KEY To Making Money!)
Remarkably, as of February 29, the combined value of the holdings in U.S.-based Bitcoin ETFs was roughly half the value of all known gold ETFs. The Bitcoin ETFs, which began trading in January, held $43.2 billion, while gold ETFs held $92.3 billion.
The cryptocurrency’s breathless catch-up to gold is reflected in the dramatic difference in sentiment between the two assets right now. CoinStats’ Crypto Fear and Greed Index is currently flashing Extreme Greed, while JM Bullion’s Gold Fear and Greed Index sits in Neutral territory.
A Tale Of Two Assets: Risk And Reward
As you know, I often recommend a 10% weighting in gold, with half in physical gold (coins, bars, jewelry) and the other half in high-quality gold mining stocks, mutual funds and ETFs. I believe this weighting is suitable for most investors seeking a non-correlated asset, but especially conservative investors who might not have a long-term investment horizon.
For investors with a longer horizon, or those with a bigger risk appetite, there’s Bitcoin, whose volatility is about eight times greater than that of gold, its analog cousin. Whereas the precious metal has a 10-day standard deviation of ±3%, Bitcoin’s is ±25%.
Though not guaranteed, with greater risk can come greater reward. For the six-month period through the end of February, Bitcoin more than doubled in price, surging close to 130%. Over the same period, gold increased a little over 5% while gold majors, as measured by the NYSE Arca Gold Miners Index, lost 9%.
Whether the excitement surrounding Bitcoin is siphoning flows away from gold, however, is unclear…