Inflation concerns have led to more volatility in the stock and bond markets of late. That should be good news for gold, a tangible asset with a limited supply that often does well in times of inflation. Central banks can always print more money. Miners can’t just magically create more gold.
But gold has recently lost some of its luster thanks to a new financial kid in town: bitcoin. Gold prices are down about 9% this year and are trading nearly 15% below the all-time high of more than $2,000 an ounce set last summer.
Meanwhile, bitcoin has soared nearly 70% and is currently hovering just below $50,000 per coin — not far from the record high it reached last month.
Still, fans of gold think the yellow metal is due for a rebound — even if bitcoin continues to march higher as well.
Gold is a classic fear trade. Prices rallied last year on worries about coronavirus lockdowns crippling the global economy. But gold also does well when investors are worried about inflation — as they are now.
Plus, the price volatility of bitcoin may make it less attractive than gold to many big institutions looking to protect their cash, despite recent decisions by the likes of Tesla and MicroStrategy to hold bitcoin on their balance sheets.
“Investors need a serious hedge against inflation, and bitcoin may not offer that,” said Ipek Ozkardeskaya, senior analyst with Swissquote, in a recent report.
Some investors think inflation fears could run rampant again if the US Senate passes President Joe Biden’s proposed $1.9 trillion stimulus package. There are questions about whether that much money is really needed now that there are multiple Covid-19 vaccines and more people are returning to work.
The worry is that all the federal stimulus money will eventually cause the economy to overheat, leading to even higher inflation. That, in turn, could boost gold prices further.
“The reason that we see higher gold prices is also mainly because the US House passed the stimulus package. We have a real fear of higher inflation,” Naeem Aslam, chief market analyst with AvaTrade said in a report, adding that more stimulus will “only fuel the fire” of inflation.
Analysts at European asset manager Amundi are also concerned about a sudden spike in inflation due to higher interest rates as the US economy recovers.
They argue that investors need to “stay vigilant” and get ahead of this inflation scenario and that buying gold is one way to do so.
“Gold could also provide support amid abundant liquidity in the current environment,” the Amundi analysts wrote in a report.
Analysts from UBS Global Wealth Management also said in a report Tuesday that the recent pullback in gold looked “overdone” and that —”spikes in market uncertainties…could offer support in the short run.”
Still, a gold rebound doesn’t have to coincide with a bitcoin pullback. In fact, cryptocurrencies could continue be a good bet at a time when bond yields are expected to keep climbing.
“Gold is good for slightly higher inflation but not necessarily much higher real interest rates,” said Brad Neuman, director of market strategy at Alger, in an interview with CNN Business.
Neuman said that although inflation is often accompanied by rising rates, the problem is that rates can spike dramatically and hurt the returns on gold. That might be one of the reasons it has lagged bitcoin lately.
As such, Neuman thinks bitcoin — as well as crypto-related companies such as PayPal, which now allows users to trade and hold bitcoin on the platform — could be even better bets than gold.
Bitcoin backers also point out that the cryptocurrency likely will remain popular with investors who view it as a store of value during times of inflation — just like gold.
The biggest reason bitcoin has surged this year probably has more to do with the fact that investors have come to recognize that the cryptocurrency is even more scarce than gold or other precious metals.
There is a cap of just 21 million bitcoins built into its source code. And roughly 18.6 million are already in circulation.
“There is a finite number of coins. That is why bitcoin can replace gold,” said Steve Ehrlich, CEO of Voyager Digital, a cyptocurrency brokerage firm. “It really is more like digital gold and not necessarily a medium for payment.”
Most consumers are unlikely to use gold or bitcoin to actually buy anything, but both assets could wind up being investment winners at a time when consumer prices are rising.
Author: By CNN Newsource
- Bitcoin Still ‘Early’ Despite Huge 500% Price Rally—$28 Billion Asset Manager
- Goldman Sachs Cashes in, Re-Opens Bitcoin Trading Desk
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- Bitfarms Purchases 48,000 Bitcoin Miners, Plans to Increase Hashpower by 5 Exahash – Mining Bitcoin News
Bitcoin Still ‘Early’ Despite Huge 500% Price Rally—$28 Billion Asset Manager
Bitcoin has exploded over recent months, soaring to almost $60,000 as investors have rushed to buy cryptocurrencies.
Now, despite bitcoin racking up gains of almost 500% over the last 12 months, British asset manager Ruffer has predicted bitcoin adoption by traditional financial institutions is just beginning—calling its entry in to the bitcoin market last year “early.”
MORE FROM FORBESBitcoin Price Prediction: How Far Could The Bitcoin Bull Run Go?By Billy Bambrough
The bitcoin price has soared over the last year, boosted by central bank stimulus measures, fears … [+] over inflation and institutional support.
“We think we are relatively early to this, at the foothills of a long trend of institutional adoption and financialisation of bitcoin,” Ruffer, which manages $28.3 billion of investor money, said in its half year report on Monday, explaining it expects the bitcoin price to climb as the cryptocurrency becomes mainstream.
“Think of bitcoin’s bad reputation as a risk premium—as we move through the process of normalisation, regulation, and institutionalisation, the compression of this premium can have a dramatic effect on the price.”
Last month, the combined value of the 18.6 million bitcoin tokens in circulation reached $1 trillion for the first time—double the $500 billion it started 2021 and far beyond its late-2017 high. Bitcoin’s rally has been put down to a combination of Wall Street institutional adoption, corporate interest, and retail traders piling into the market—with some suggesting it may have a lot further to go.
Bitcoin’s bull run has been helped by a number of high-profile investors naming it as a hedge against the inflation they see on the horizon due to record government money-printing in the wake of coronavirus-induced lockdowns. Central banks around the world have promised to keep interest rates near zero to help encourage spending.
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The bitcoin price broke fresh ground in December, climbing above its late-2017 high of $20,000 per … [+] bitcoin and reaching almost $60,000 last month.
According to Ruffer, it invested in bitcoin in November because it “brings something significantly different to the portfolio.”
“Due to zero interest rates the investment world is desperate for new safe-havens and uncorrelated assets,” the company said.
However, Ruffer did caution that it has intentionally kept its bitcoin bet “small” in order to contain any potential losses.
“If we are wrong, bitcoin will return to the shadows and we will lose money—this explains why we have kept the position size small but meaningful.”
Top Federal Reserve officials have expressed their surprise at bitcoin’s continued success and billionaire philanthropist Bill Gates has warned that people with less money than Tesla CEO Elon Musk should “probably watch out.”
Author: Billy Bambrough
Goldman Sachs Cashes in, Re-Opens Bitcoin Trading Desk
Goldman Sachs has restarted its crypto trading desk, specifically Bitcoin futures, Reuters reported today.
One of the world’s largest investment banks, Goldman Sachs, first launched a crypto trading desk in 2018—but later put things on hold due to a price crash.
The bank will start dealing Bitcoin futures for clients from next week, Reuters reported. The bank’s crypto team will work within the Global Markets division.
According to the report, Goldman Sachs will also be involved in an unspecified blockchain project and the development of central bank digital currencies (CBDCs).
The bank’s renewed crypto interest comes at a time when institutions are eying up assets like Bitcoin and Ethereum.
For example, the head of financial services giant Fidelity’s Global Macro, Jurrien Timmer, yesterday said Bitcoin had evolved as “digital gold.”
While U.S. financial services multinational Citi has also released a report where it said Bitcoin could be the world’s first choice currency for international trade.
Alongside the trading desk, Goldman Sachs is underwriting Coinbase’s alleged multi-billion public listing. Though unknown at press time, underwriters can earn up to 7% in fees for performing such duties.
Disclaimer: The author is invested in BTC, which is mentioned in this article.
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Mathew Di Salvo
Bitcoin : Microstrategy and Tesla are moving parts of their corporate treasuries into Bitcoin says CIti Research
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Bitfarms Purchases 48,000 Bitcoin Miners, Plans to Increase Hashpower by 5 Exahash – Mining Bitcoin News
The publicly listed Canadian bitcoin mining operation Bitfarms has announced the firm is purchasing 48,000 Microbt Whatsminer mining rigs in order to expand capacity. Bitfarms highlights the acquisition of new miners will up the company’s hashpower by approximately 5 exahash per second (EH/s).
The Canadian bitcoin (BTC) mining company Bitfarms (TSXV:BITF, OTC:BFARF) announced on Tuesday the company has entered an agreement where it plans to purchase 48,000 mining rigs manufactured by Microbt. The China-based firm Microbt is the manufacturer of Whatsminer devices, which are some of the most powerful application-specific integrated circuit (ASIC) machines in the world. For instance, the company’s Whatsminer M30S++ is the most-profitable SHA256 ASIC miner on the market today according to current data.
Bitfarm’s announcement on Tuesday explains that Microbt has become the firm’s “supplier of choice.” During the last eight months, Bitfarms said it acquired 12,000 machines from the Chinese mining rig manufacturer. Bitfarms stressed that the firm expects the mining rig shipments to begin “on or before January 2022.” “The miners will be installed at our existing and new facilities which are currently in development,” the company said. Microbt said the mining manufacturer looks forward to providing the 5 EH/s worth of miner to Bitfarms.
“We are very excited to enhance and expand our partnership with Bitfarms,” Vincent Zhang, Microbt’s global sales director said during the purchase announcement. “The miners to be supplied to Bitfarms are very reliable and stable. These miners will generate tremendous value to Bitfarms in its mining operations and [to] its investors,” Zhang added.
Furthermore, the CEO of Bitfarms, Emiliano Grodzki, explained the acquisition helps during a time of excessive demand for ASICs.
“The supply of miners will be one of the greatest challenges for the foreseeable future due to a global shortage of wafers used to create semiconductor chips which is a vital component in mining rigs,” Grodzki detailed. “Our strategy will be to continue to grow our own infrastructure and professional operations and conduct mining in our own facilities which increase operational efficiency and profitability,” he added.
News.Bitcoin.com reported last week that Chinese mining manufacturers are hard-pressed from demand and nearly every manufacturer of next-generation rigs are completely sold out. Even the Bitfarm announcement itself notes that delivery is slated for at least by or in January 2022 and “the final mining rigs expected to arrive in December 2022.” Many publicly listed mining firms have leveraged their massive buying power in order to procure ASIC mining rigs in advance.
Moreover, Bitfarm’s 48,000 Microbt Whatsminer rig purchase, is the second-largest mining acquisition since Marathon Patent Group settled a record-breaking purchase for 70,000 high-performance Bitmain Antminer S19s at the end of 2020. Bitfarm’s deal announcement with Microbt did not disclose a dollar-purchasing amount for the 48,000 miners. Marathon did disclose in December that it spent $170 million in its agreement with the Chinese mining rig manufacturer Bitmain.
What do you think about the purchase Bitfarms made in order to acquire 48,000 high-powered bitcoin mining rigs? Let us know what you think about this subject in the comments section below.
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