Bitcoin: "Gold on Steroids" with Institutional Influx
Bitcoin has frequently been compared to Gold over the years. Initially deemed a "safe haven" similar to Gold, analysts are currently evaluating these two investments to determine if Bitcoin meets the criteria as "Gold on steroids." Relative returns are adjusted for the risk of Bitcoin compared to Gold.
Over the past 5 years, up to November, Bitcoin's Sharpe Ratio has competed favorably when compared to Gold and other proven asset classes in the market. The Sharpe Ratio is defined as the difference between the return of an investment and the risk-free rate divided by the standard deviation of the investment. Simply put, the Sharpe Ratio adjusts performance for risk beyond what investors would bear for a specific asset. Jurrien Timmer, Global Macro Economic Director at Fidelity, notes that Bitcoin's correlation with the S&P 500 (+40%) is higher than that of Gold (+14%) over a 5-year period. However, the correlation between BTC and the US stock market has decreased over the years and is lower than most asset classes.
Over the past 12 months, the correlation between BTC and the S&P 500 has decreased from 40% to 25%. Timmer argues that Bitcoin is more volatile than most other assets, but the volatility impacts both ways, and BTC investments have their own risk-reward characteristics, as seen in the past decade.
According to a CoinShares report, institutional investors continue to pour money into Bitcoin funds, with a weekly inflow of $132.8 million as of December 4th. At the time of writing, the price of Bitcoin is $44,162 on Binance.
Over the past 5 years, up to November, Bitcoin's Sharpe Ratio has competed favorably when compared to Gold and other proven asset classes in the market. The Sharpe Ratio is defined as the difference between the return of an investment and the risk-free rate divided by the standard deviation of the investment. Simply put, the Sharpe Ratio adjusts performance for risk beyond what investors would bear for a specific asset. Jurrien Timmer, Global Macro Economic Director at Fidelity, notes that Bitcoin's correlation with the S&P 500 (+40%) is higher than that of Gold (+14%) over a 5-year period. However, the correlation between BTC and the US stock market has decreased over the years and is lower than most asset classes.
Over the past 12 months, the correlation between BTC and the S&P 500 has decreased from 40% to 25%. Timmer argues that Bitcoin is more volatile than most other assets, but the volatility impacts both ways, and BTC investments have their own risk-reward characteristics, as seen in the past decade.
According to a CoinShares report, institutional investors continue to pour money into Bitcoin funds, with a weekly inflow of $132.8 million as of December 4th. At the time of writing, the price of Bitcoin is $44,162 on Binance.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.